2004 ANZ financial report

growthperformancesustainability

financialreportfinancial report I 1

FINANCIAL REPORTCONTENTS

page
Directors’ Report2
Remuneration Report
6Statements of Financial Performance 25
Statements of Financial Position
26
Statements of Changes inShareholders’ Equity
27
Statements of Cash Flows28
Notes to the Financial Statements
1 Accounting Policies
2 Income
3 Expenses
4 Equity Instruments Issued
to Employees
5 Remuneration of Auditors
6 Income Tax Expense
7 Dividends
8 Earnings per Ordinary Share
9 Liquid Assets
10 Due from Other
Financial Institutions
11 Trading Securities
12 Investment Securities
13 Net Loans and Advances
14 Impaired Assets
15 Provisions for Doubtful Debts
16 Customers’ Liabilities
for Acceptances
17 Regulatory Deposits
18 Shares in Controlled Entities,
Associates and Joint Venture Entities
19 Deferred Tax Assets
20 Goodwill
21 Other Assets
22 Premises and Equipment
23 Due to Other Financial Institutions
24 Deposits and Other Borrowings

29
34
35
36
36
37
38
40
41
41
42
43
46
49
51
52
52
53
53
54
54
55
57
57

page
25 Income Tax Liabilities
58
26 Payables and Other Liabilities
58
27 Provisions
59
28 Bonds and Notes
60
29 Loan Capital
61
30 Share Capital62
31 Outside Equity Interests
64
32 Capital Adequacy
65
33 Average Balance Sheet andRelated Interest
67
34 Interest Spreads and Net Interest
Average Margins
70
35 Market Risk
71
36 Interest Sensitivity Gap
73
37 Net Fair Value of Financial
75
Instruments
77
38 Derivative Financial Instruments
39 Securitisation
83
40 Life Insurance
83
41 Segment Analysis
84
42 Notes to the Statements ofCash Flows86
43 Controlled Entities
88
44 Associates
89
45 Interests in Joint Venture Entities 89
46 Fiduciary Activities
91
91
47 Commitments
48 Contingent Liabilities, Contingent
Asset and Credit Related
Commitments
92
49 Superannuation Commitments
96
50 Employee Share and Option Plans 98
51 Directors and Specified Executives
Remuneration and Share104
Option Disclosures
52 Directors and Specified Executives Related Party Transactions
105

page
53 Directors of Controlled Entities of
the Company - Related
Party Transactions
107
54 Transactions with Associates andJoint Venture Entities - Related
Party Disclosures
107
55 US GAAP Reconciliation
108
56 Exchange Rates
123
57 International Financial
Reporting Standards
124
58 Events Since the End126
of the Financial Year
Directors’ Declaration
Auditors’ Report
Critical Accounting Policies
Risk Management
Financial Information

127
128
129
134

1
2

135

3
4
5
6

Cross Border Outstandings
Certificates of Deposit and Term
Deposit Maturities
Volume and Rate Analysis
Concentrations of Credit Risk
Doubtful Debts – Industry Analysis
Short Term Borrowings

Glossary
Alphabetical Index

135
136
137
139
140
141
143

2 I financial report

DIRECTORS’ REPORTThe directors present their report together
with the Financial Report of theconsolidated entity (the Group), being
Australia and New Zealand Banking Group
Limited (the Company) and its controlled
entities, for the year ended 30 September
2004 and the Auditors' Report thereon.
The information is provided in conformity
with the Corporations Act 2001.

PRINCIPAL ACTIVITIESThe principal activities of the Groupduring the year were general banking,mortgage lending, leasing, hire purchaseand general finance, international andinvestment banking, nominee andcustodian services, executor and trustee
services and through its joint venture ING
Australia Limited (INGA) and ANZ National
Bank Limited, life insurance and wealthmanagement.
There has been no significant change in
the nature of the principal activities of theGroup during the financial year.
At 30 September 2004, the Group had
1,190 points of representation.

RESULT> Profit - Consolidated net profit after
income tax attributable to shareholdersof the Company was $2,815 million,
an increase of 20% over the prior year.

models recognise that the generalprovision balance must be regularly
reviewed, and in rare situations, increased
to cover unusual events. The balance is at
an appropriate level.
> Net specific provisions were$443 million, down $84 million fromthe prior year. Gross non-accrual loans
decreased to $829 million, down from
$1,007 million, or 0.4%, down from
0.7%, of net loans and advances.
The reductions reflect the strategy to
reduce risk in overseas portfolios(not including New Zealand).
Further details are contained in the
Chief Financial Officer’s review on pages
12 to 19 of the 2004 Annual Report.

STATE OF AFFAIRSIn the directors' opinion, there have beenno significant changes in the state ofaffairs of the Group during the financial
year, other than:> Acquisition of the National Bank of New
Zealand (NBNZ) - On 24 October 2003,
the Company announced it had enteredinto an agreement to acquire NBNZ andthe acquisition was completed on
1 December 2003. On 26 June 2004,
NBNZ was amalgamated with ANZ Banking
Group (New Zealand) Limited to create
ANZ National Bank Limited.
> Funding of NBNZ acquisition -> Net loans and advances increased by
37% from $149,465 million to $204,962
million, primarily due to the acquisition of
National Bank of New Zealand (NBNZ) andgrowth in mortgage lending andcommercial lending in Australia.

> Renounceable Rights Issue - In November/
December 2003, the Company issued
276,847,766 ordinary shares by way of a
2 for 11 "Renounceable Rights Issue" at$13 per share in the Company, raising$3,562 million (net of issue costs).

> Deposits and other borrowings
increased by 35% from $124,494 million
to $168,557 million primarily due tothe acquisition of NBNZ and to fundasset growth.

> US Stapled Trust Security Issue On 27 November 2003, the Company
raised USD1.1 billion via the issue of
non-cumulative stapled trust securities,
to support the capital and funding baseof the Group.

> The provision for doubtful debts has
been determined using economic loss
provisioning (ELP) and is based on theGroup's risk management models.
The ELP charge increased 3% from$614 million to $632 million, including$62 million relating to NBNZ. The current
charge reflects a decrease in the ELP rateover the year in line with the Group's
improving risk profile. This is as a resultof growth in low risk domestic assets(principally mortgages), the acquisition of
NBNZ, the continued risk reduction
strategy covering the overseas portfolio
and high risk assets, and a lower
Corporate Centre charge reflecting lower
unexpected offshore losses. ANZ’s ELP> Trust Securities Issues (TrUEPrS) On 12 December 2003, the Company
bought back its 124,032,000 TrUEPrS
that were issued at USD6.25 per sharein 1998. Further details are included
on page 63 of this 2004 Financial Report.
> Reduction of Risk - The Company has
been actively reducing the overall risk
profile of the Group. Net specificprovisions of $443 million were down
16% compared to the prior year. This was
below the amount accrued for doubtful
debts in the Statement of Financial
Performance of $632 million.
Further review of matters affecting theGroup's state of affairs is also containedin the 2004 Annual Report under the
Chairman's Report on pages 8 to 9, theChief Executive Officer's Report on pages
10 to 11 and the Chief Financial Officer's
Review on pages 12 to 19.

DIVIDENDS
The directors propose that a final fully
franked dividend of 54 cents per fully
paid ordinary share be declared on
15 November 2004 and be paid on
17 December 2004. The proposed
payment amounts to approximately$983 million.
During the financial year, the following
fully franked dividends were paid on fully
paid ordinary shares:
Type

Final
2003
Interim2004

Cents pershare

Amount before
bonus options
$m

51

777

47

850

Date ofpayment

19 December
2003
1 July 2004

REVIEW OF OPERATIONS
A review of the operations of the Groupduring the financial year and the resultsof those operations are contained in the
Chairman's Report, the Chief Executive
Officer's Report, and the Chief Financial
Officer's Review and Business
Performance on pages 8 to 9, 10 to 11,
12 to 19 and 34 to 37 respectively of the2004 Annual Report.

financial report I 3> Peter Marriott, BEc (Hons),
ANZ Chief Financial Officer.

EVENTS SINCE THE END OF THE
FINANCIAL YEAR

DIRECTORS’ QUALIFICATIONSAND EXPERIENCE> Merger of ANZ’s trustee businessannounced with Equity Trustees Limited(announced 12 October 2004);

From 1 October 2003 to 31 January 2004,
the Board was comprised of seven nonexecutive directors. Three new nonexecutive director appointments weremade in 2004: Dr Greg Clark on
1 February 2004; and Mr David Meiklejohnand Mr John Morschel on 1 October 2004.
These new appointees will be retiring andseeking election at the 2004 Annual
General Meeting. Information about these
directors is included in the Notice ofAnnual General Meeting.

Mr Marriott has been involved in thefinance industry for more than 20 years.
Mr Marriott joined ANZ in 1993. Prior tohis career at ANZ, Mr Marriott was aPartner in the Melbourne office of the then
KPMG Peat Marwick. He is a Fellow of anumber of professional organisations
including the Institute of Chartered
Accountants in Australia and theAustralian Institute of Banking and
Finance. He is also a Member of theAustralian Institute of Company Directors.

At the date of this report, the Board
comprises ten non-executive directors
who have a diversity of business andcommunity experience and one executive
director, the Chief Executive Officer,
who has extensive banking experience.
The names of directors and details of their
qualifications and experience arecontained on pages 42, 43 and 47 of the2004 Annual Report and on anz.com.

> John Priestley, BEc, LLB, ANZ Deputy
General Counsel and Company Secretary.

> On-market share buyback of atleast $350 million pending regulatory
approval for a new offshore hybrid
equity transaction (announced
26 October 2004); and> Sale of London-headquarteredproject finance activities (announced
26 October 2004).
Other than the items above (these arefurther described in note 9 of the Concise
Report to the 2004 Annual Report on page
86 and note 58 of this Financial Report),
no matter or circumstance has arisen
between 30 September 2004 and the dateof this report that has significantly
affected or may significantly affect theoperations of the Group in future financial
years, the results of those operationsor the state of affairs of the Group in
future years.

FUTURE DEVELOPMENTS
Details of likely developments in theoperations of the Group in future financial
years are contained in the Chairman's
Report and the Chief Executive Officer's
Report contained in the 2004 Annual
Report. In the opinion of the directors,
disclosure of any further information
would be likely to result in unreasonableprejudice to the Group.

ENVIRONMENTAL REGULATIONThe operations of the Group are notsubject to any particular or significant
environmental regulation under a law of
the Commonwealth or of a State or
Territory. However, the operations of theGroup may become subject toenvironmental regulation when enforcing
securities over land. ANZ has developed
policies to appropriately manage suchenvironmental risks. ANZ has not incurred
any environmental liabilities during theyear. Further information on ANZ's
environmental framework and practices
can be found in the 2004 Annual Reporton pages 38 to 39 and on anz.com.

Special responsibilities and attendanceat meetings by directors, are shownon page 51 of the 2004 Annual Report.
For those directors in office at
30 September 2004, details of thedirectorships of other listed companies
held by each director in the 3 years prior
to the end of the 2004 financial year are
listed in the 2004 Annual Report on
pages 42 and 43.

COMPANY SECRETARIES’QUALIFICATIONS AND
EXPERIENCE
Currently there are three people appointed
as Company Secretary of the Company.
Details of their roles are contained on
page 51 of the 2004 Annual Report.
Their qualifications are as follows:> Tim L'Estrange, LLB, BCom, ANZ Group
General Counsel and Company Secretary
Mr L'Estrange has a long-standing legal
career spanning 25 years. He hassignificant experience in corporate law.
Mr L'Estrange joined ANZ in 2003.
Prior to ANZ, he worked closely with
Boards and senior management of major
corporations, banks and financial
institutions. Mr L'Estrange was the
National Executive Partner, Litigation and
Dispute Resolution of Allens Arthur
Robinson and a member of the Board ofManagement of that firm. He was also
Managing Partner of Allen Allen & Hemsley.

Mr Priestley, a qualified lawyer, joined
ANZ in 2004. Prior to ANZ, he had a longcareer with the Mayne Group as Company
Secretary and Group General Manager,
Corporate Services responsible for thelegal, company secretarial, complianceand insurance functions.

NON-AUDIT SERVICES
The Company's Relationship with External
Auditor Policy states that the external
auditor may not provide services that areperceived to be in conflict with the role of
the auditor. These include consulting
advice and sub-contracting of operational
activities normally undertaken bymanagement, and engagements where
the auditor may ultimately be required toexpress an opinion on its own work.
Specifically the policy:> Limits the non-audit services that may
be provided;> Requires that audit and permitted
non-audit services must be pre-approvedby the Audit Committee, or pre-approvedby the Chairman of the Audit Committee
and notified to the Audit Committee; and> Requires the external auditor to notcommence an audit engagement for theGroup, until the Group has confirmed thatthe engagement has been pre-approved.
The Audit Committee has reviewed asummary of non-audit services provided
by the external auditor for 2004, and has
confirmed that the provision of non-audit
services for 2004 is compatible with thegeneral standard of independence for
auditors imposed by the Corporations
Act 2001. This has been formally advised
to the Board of Directors.
The external auditor has confirmed to the
Audit Committee that they have compliedwith the Company's Relationship with
External Auditor Policy on the provision of
non-audit services by the external auditor
for 2004.

4 I financial report

The non-audit services supplied by theGroup's external auditor, KPMG, andthe amount paid or payable by type of
non-audit service during the year to
30 September 2004 are as follows:

Non-audit service

Amount paid/payable$’000

Co-sourced internal audit services1 1,260
Tax compliance andrelated services
628
Controls and process reviews
249
Review of the non-cumulative
US Stapled Trust Securities issue 219
NBNZ due diligence oversight420
Sarbanes-Oxley and International
Financial ReportingStandard matters
335
Accounting advice
170
Securitisation review
128
Review of capital raising circulars
73
Other
157
Total
3,639
1 The work performed by KPMG was independent of theexternal audit team and management

The directors are satisfied that theprovision of non-audit services by theexternal auditor during the year to
30 September 2004 is compatible withthe general standard of independence for
auditors imposed by the Corporations
Act 2001.

AUDITOR’S INDEPENDENCE
DECLARATIONThe Company's lead auditor has provided
a written declaration under Section 307C
of the Corporations Act 2001 that to thebest of his knowledge and belief, there
have been no contraventions of:> the auditor independence requirementsof the Corporations Act 2001 in relation to
the audit; and> the applicable Australian code ofprofessional conduct in relation to
the audit.
A copy of this declaration is detailed on
page 88 of the 2004 Annual Report.
This declaration is incorporated in andforms part of the Directors' Report.

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

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

DIRECTORS’ AND
OFFICERS’ INDEMNITY
The Company's Constitution (Rule 11.1)
permits the Company to indemnify each
officer or employee of the Company
against liabilities (so far as may bepermitted under the Corporations Act 2001)
incurred in the execution and discharge ofthe officer's or employee's duties.
It is the Company's policy that its
employees should not incur any liability
for acting in the course of theiremployment legally, within the policiesof the Company and provided they act ingood faith.
Under the policy, the Company will
indemnify employees against any liability
they incur in carrying out their role.
The indemnity protects employees andformer employees who incur a liability
when acting as an employee, trustee orofficer of the Company, or a subsidiary of
the Company at the request of the Company.
The indemnity is subject to the
Corporations Act 2001 and will not apply
in respect of any liability arising from:> a claim by the Company;> a claim by a related body corporate;> a lack of good faith;> illegal or dishonest conduct; or> non compliance with the Company's
policies or discretions.
The Company has entered into Deeds ofAccess, Insurance and Indemnity witheach of its directors and secretaries andwith certain employees and certain otherindividuals who act as directors of related
body corporates or of another company.
To the extent permitted by law, theCompany indemnifies the individual for all
liabilities, including costs, damages andexpenses incurred in their capacity as an
officer of the company to which they havebeen appointed.
The Company has indemnified thetrustees and former trustees of certain of
the Company's superannuation funds anddirectors, former directors, officers andformer officers of trustees of various
Company sponsored superannuation
schemes in Australia. Under the relevant
Deeds of Indemnity, the Company must
indemnify each indemnified person if theassets of the relevant fund are insufficient
to cover any loss, damage, liability or cost
incurred by the indemnified person inconnection with the fund, being loss,
damage, liability or costs for which theindemnified person would have been
entitled to be indemnified out of theassets of the fund in accordance with thetrust deed and the Superannuation
Industry (Supervision) Act 1993.
This indemnity survives the terminationof the fund. Some of the indemnified
persons are or were directors or executive
officers of the Company.
The Company has also indemnified certain
employees of the Company, being trustees
and administrators of a trust which is a
subsidiary entity, from and against any
loss, damage, liability, tax, penalty,
expense or claim of any kind or naturearising out of or in connection with thecreation, operation or dissolution of thetrust, where they are acting in good faithand in a manner that they reasonably
believed to be within the scope of theauthority conferred by the trust.

financial report I 5

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

DIRECTORS’ AND
EXECUTIVE OFFICERS’REMUNERATION POLICY
Details of ANZ's remuneration policy inrespect of the directors and executive
officers is detailed in the Remuneration
Report on pages 54 to 71 of the 2004
Annual Report and pages 6 to 23 of thisFinancial Report. Details of the
remuneration paid to each non-executive
director, the Chief Executive Officer andother specified executives are detailed in
the Remuneration Report. The Remuneration
Report is incorporated in and forms part ofthis Directors' Report.

DIRECTORS’ SHAREHOLDINGSROUNDING OF AMOUNTS

The directors' shareholdings, bothbeneficial and non-beneficial, as at thedate of this report in the shares of theCompany are detailed in the
Remuneration Report.

The Company is a company of the kindreferred to in Australian Securities andInvestments Commission class order
98/100 dated 10 July 1998 (as amended)pursuant to section 341(1) of the
Corporations Act 2001. As a result,amounts in this Financial Report havebeen rounded to the nearest million dollars
except where otherwise indicated.

EXECUTIVE OFFICERS’SHARE OPTIONS
Details of share options issued over
un-issued shares granted to theChief Executive Officer, senior executives
and officers, and on issue as at thedate of this report are detailed in the
Remuneration Report and note 50 tothis 2004 Financial Report.
No person entitled to exercise any option
has or had, by virtue of an option, a rightto participate in any share issue of any
other body corporate. The names of all
persons who currently hold options areentered in the register kept by theCompany pursuant to section 170 of the
Corporations Act 2001. This register may
be inspected free of charge.

Signed in accordance with a resolution of
the directors.

Charles Goode
Director

John McFarlane
Chief Executive Officer
4 November 2004

6 I financial report

REMUNERATION REPORTCONTENTS
Section A.

Remuneration Tables

Section D. Chief Executive Officer’s Remuneration

Section B.

Non-Executive Directors’ Remuneration

Section E. Specified Executives’ Contract Terms

Section C.

Remuneration Structure

Section F.

Equity Instruments relating to Directors and Specified Executives

SECTION A. REMUNERATION TABLES
For the year ended 30 September 2004 details of the emoluments of the directors are set out below:

PRIMARY3
Cashsalary/fees

Value of sharesacquired inlieu of cash
salary/fees2$

Associated entity
board fees (cash)$

Long service
leave accrued
duringthe year$$1Non-executive Directors

CB Goode (Appointed director July 1991;
appointed Chairman August 1995)
Independent Non Executive Director, Chairman

2004

91,000n/a

338,000–

2003

76,000n/a274,000–

G Clark (Appointed February 2004)
Independent Non Executive Director

2004
2003

86,667
n/a

n/a
n/a

–
n/a

–
n/a

JC Dahlsen (Appointed May 1985)7
Independent Non Executive Director

2004
2003

130,000
110,000

n/a
n/a

–
–

–
–

RS Deane (Appointed September 1994)
Independent Non Executive Director

2004
2003

130,000
110,000

n/a
n/a

–
–

117,9589
100,996

JK Ellis (Appointed October 1995)
Independent Non Executive Director

2004
2003

103,000
110,000

n/a
n/a

27,000–––DM Gonski (Appointed February 2002)
Independent Non Executive Director

2004
2003

130,000
110,000

n/a
n/a

–
–

50,15042,500MA Jackson (Appointed March 1994)
Independent Non Executive Director

2004
2003

130,000
88,000n/an/a–
22,000––

BW Scott (Appointed August 1985)7
Independent Non Executive Director

2004
2003

130,000
110,000

n/a
n/a

–
–

24,389–TOTAL OF NON-EXECUTIVE DIRECTORS

2004
2003

930,667
714,000n/an/a

365,000
296,000

192,497
143,496

J McFarlane (Appointed October 1997)
Chief Executive Officer

2004
2003

438
702,565

78,211
23,431

1,882,831
709,685––

TOTAL OF ALL DIRECTORS

2004
2003

930,710
1,416,565

78,211
23,431

2,247,831
1,005,685

192,497
143,496

Executive Director

1 DE Meiklejohn and JP Morschel commenced as directors on 1 October 2004
2 Shares acquired through participation in Directors' Share Plan (relates to CEO only in relation to cash bonus, as Non-Executive Directors do not participate in short-term incentive arrangements).
Value reflects the price at which the shares were purchased on market (amortisation not applicable)
3 Non-monetary benefits for all directors are nil
4 Accrual relates to Directors' Retirement Scheme. If each non-executive director had ceased to be a director as at 30 September 2004, the following benefits would have been payable under the
Directors' Retirement Scheme: CB Goode - $1,069,255; G Clark - $33,008; JC Dahlsen - $402,365; RS Deane - $644,116; JK Ellis - $412,058; DM Gonski - $146,725; MA Jackson - $366,690;
BW Scott - $389,125. The Directors' Retirement Scheme is being reviewed and it is currently planned to be discontinued after 30 September 2005
5 Details of options and deferred shares granted appear in the Annual Report of the year in which they are granted. In accordance with the requirements of AASB1046A, the amortisation value includes a
proportion of the fair value (taking into account market-related vesting conditions) of all equity that had not yet fully vested as at the commencement of the financial year. It is assumed that 100% of theoptions will vest at the commencement of their exercise period (ie the shortest possible vesting period is assumed). The fair value is determined at grant date and is allocated on a straight-line basis
over the shortest possible vesting period. The fair value is determined using a binomial option pricing model that is explained in section F8. The amount included as remuneration is not related to nor
indicative of the benefit (if any) that may ultimately be realised should the options become exercisablefinancial report I 7

EQUITY5

POST EMPLOYMENTOTHER6
Total

Committee
fees(cash)

Value of sharesacquired in lieu
of cash bonus2

Primary
total

Super
contributions

Retirement
benefit accrued
during the year4

Total
amortisation of
LTI options

$

$

$

$

$

$

$

$

–

n/a

429,000

11,297

99,586n/a–

539,883–n/a

350,000

10,52016,996n/a–

377,516

10,834
n/a

n/a
n/a

97,501
n/a

7,597
n/a

33,008
n/a

n/a
n/a

–
n/a

138,106
n/a

65,05025,000n/an/a

195,050
135,000

11,296
10,52074,35622,430

n/a
n/a

–
–

280,702167,950

19,500–n/an/a267,458
210,996

10,321
9,900

70,99817,151

n/a
n/a

–
–

348,777
238,047

52,25025,000n/an/a

182,250
135,000

11,297
10,52065,78023,384

n/a
n/a

–
–

259,327
168,904

16,050–n/an/a196,200
152,500

11,297
10,52067,22749,078

n/a
n/a

–
–

274,724
212,098

42,250–n/an/a172,250
110,000

10,8999,900

56,352(5,562)11

n/a
n/a

–
–

239,501
114,338

30,75025,000n/a
n/a

185,139
135,000

11,297
10,52064,83915,950

n/a
n/a

–
–

261,275
161,470

236,684
75,000n/an/a

1,724,848
1,228,496

85,301
72,400532,146
139,427

n/a
n/a

–
–

2,342,295
1,440,323––

1,850,006
982,121

3,811,091
2,417,802

417,00010
87,750––2,584,88012
2,538,759

90,61913–

6,903,590
5,044,311

236,684
75,0001,850,006
982,1215,535,939
3,646,298

502,301
160,150

532,146
139,427

2,584,880
2,538,759

90,619–9,245,885
6,484,634

6

Amounts disclosed for remuneration of directors exclude insurance premiums paid by the consolidated entity in respect of directors' and officers' liability insurance contracts which cover current
and former directors and officers, including executive officers of the entity and directors, executive officers and secretaries of the controlled entities. The total premium, which cannot be disclosed
because of confidentiality agreements, has not been allocated to the individuals covered by the insurance policy as, based on all available information, the directors believe that no reasonablebasis for such allocation exists

7

JC Dahlsen and BW Scott will be retiring as directors on 3 February 2005 and 23 April 2005 respectively

8

J McFarlane elected to use almost all his cash salary and bonus to purchase on market deferred shares under the Directors' Share Plan.

9

Amounts paid in NZD are converted to AUD at an average rate for the year of 1.1254 (1.1139 in 2003)

10 Includes $300,000 additional employer contribution, agreed as part of contract extension announced 26 October 2004 (refer to section D2)
11 In accordance with the ANZ Directors' Retirement Scheme (explained in section B2), MA Jackson's Retirement Benefit accrued during the year is shown as negative because the increase in thebalance held in the ANZ Staff Superannuation Scheme (for the year ended 30 September 2003) exceeded the increase in other remuneration for the 3 preceeding years (ie from the 3-year period
ended 30 September 2002 to the 3-year period ended September 2003)
12 Amortisation value of options as a percentage of total remuneration (as shown in the Total column above) was 37% in 2004 (50% in 2003)
13 Relates to reimbursement to J McFarlane for the additional tax liability on his UK Pension Plan holdings, arising as a result of Australian Foreign Investment Fund rules, and J McFarlane’s continuing
Australian residency (in accordance with the contractual agreement detailed in section D2)

8 I financial report

For the year ended 30 September 2004 details of the emoluments of the top seven executives (Specified Executives), other than the
Chief Executive Officer, are set out below and include the five most highly remunerated executives in the Company and the Group(as required under the Corporations Act 2001) and the top executives in the Group by authority (as required by AASB1046):

PRIMARY
Cashsalary/fees

Non monetary
benefits1$

Long service
leave accrued
duringthe year$$Specified Executives
Sir J Anderson (appointed 1 December 2003)7
Chief Executive & Director, ANZ National Bank Limited

2004
2003

672,792
n/a

–
n/a

–
n/a

Dr RJ Edgar
Chief Operating Officer

2004
2003

723,651
583,500

56,212
2,399

31,552
31,144

E Funke Kupper8
Group Managing Director Asia-Pacific

2004
2003

654,550
654,850

10,846
10,865

7,277
6,869

BC Hartzer9Group Managing Director Personal Banking

2004
2003

543,062454,072

15,694
11,81257,091
65,425PJO Hawkins
Group Managing Director Group Strategic Development

2004
2003

551,625
593,432

11,678
11,646

7,277
6,869

PR Marriott
Chief Financial Officer

2004
2003

728,451654,850

29,098
10,865

7,277
6,869

S Targett (appointed 5 May 2004)
Group Managing Director Institutional Financial Services

2004
2003

305,407
n/a

5,101
n/a

2,934
n/a

TOTAL

2004
2003

4,179,538
2,940,704

128,62947,587

113,408
117,176

1

Non monetary benefits provided to Specified Executives consist of salary packaged items such as car parking and novated lease motor vehicles

2

Total cash bonus relates to the cash component provided as part of ANZ's short-term incentive program in May 2004 (50% cash) and the full bonus amount from
October 2004 (which was 100% cash, except in those instances where the Specified Executive elected to receive shares in lieu, in which case the value of these elective shares are shown above as
though they were cash). Refer to section C5.1 for further details

3

Details of options and deferred shares granted appear in the Annual Report of the year in which they are granted. In accordance with the requirements of AASB1046A, the amortisation value includes
a proportion of the fair value (taking into account market-related vesting conditions) of all equity that had not yet fully vested as at the commencement of the financial year. It is assumed that 100% of
the options will vest at the commencement of their exercise period (ie the shortest possible vesting period is assumed) and that deferred shares will vest after 3 years. The fair value is determined at
grant date and is allocated on a straight-line basis over the 3-year vesting period. For options, the fair value is determined using a Binomial Option Pricing model that is explained in section F8.
For deferred shares, the fair value is the weighted average price of the Company's shares on the allocation date. The amount included as remuneration is not related to nor indicative of the benefit(if any) that may ultimately be realised should the options become exercisable4

Accrual relates to Retirement Allowance (refer to section E for further details)

financial report I 9

EQUITY3
Total cash
bonus2

POST EMPLOYMENT

Total
amortisation
value of LTI
shares$Totalamortisation
value of LTI
options$

Total
amortisation ofother equity
allocations$

Super
contributions

$

Total
amortisation
value of STI
shares$$Retirement
benefitaccrued during
year4$

335,881
n/a

–
n/a

–
n/a

–
n/a

219,168n/a

67,279n/a

32,160n/a1,327,280
n/a393,000
222,004

197,681236,895

342,662
141,264

256,110
201,924––

46,75238,025

7,163
10,276

2,054,783
1,467,431

385,500
210,008

232,208
315,650

232,024
233,812333,500
452,430––

40,95040,950––1,896,855
1,925,434

424,000
165,005

201,364
272,484

192,239
141,682

298,814265,593––

37,22432,175––

1,769,488
1,408,248

325,000
200,016

214,906
280,451

206,975
219,660

293,966
347,032––

43,87543,875

2,947
2,979

1,658,249
1,705,960

482,000
239,017

243,435
295,927

276,714
255,135

369,376
394,675––

45,542
40,950––2,181,893
1,898,288

267,000
n/a

–
n/a

–
n/a

–
n/a

188,08110
n/a

18,976n/a–n/a787,499n/a2,612,381
1,036,050

1,089,594
1,401,407

1,250,614
991,553

1,551,766
1,661,654

407,249–

300,598
195,975

42,27013,255

11,676,047
8,405,361

Total5,6$

5

Amounts disclosed for remuneration of Specified Executives exclude insurance premiums paid by the consolidated entity in respect of directors’ and officers’ liability insurance contracts which covercurrent and former directors and officers, including executive officers of the entity and directors, executive officers and secretaries of the controlled entities. The total premium, which cannot be
disclosed because of confidentiality agreements, has not been allocated to the individuals covered by the insurance policy as, based on all available information, the directors believe that noreasonable basis for such allocation exists.

6

Amortisation value of options as a percentage of total remuneration (as shown in the Total column above) was as follows: Sir J Anderson - 16% (n/a in 2003); RJ Edgar - 12% (14% in 2003);
E Funke Kupper - 18% (23% in 2003); BC Hartzer - 17% (19% in 2003); PJO Hawkins - 18% (20% in 2003); PR Marriott - 17% (21% in 2003); S Targett - 12% (n/a in 2003)

7

Amounts paid in NZD are converted to AUD at an average rate for the year of 1.1254. Amortisation of other equity allocations for Sir J Anderson relates to the granting of zero priced options (ZPO)
and shares issued under ANZ's $1,000 Employee Share Acquisition Plan (ESAP). ZPOs are granted under the ANZ Share Option Plan and have a nil exercise price and no time-based vesting criteria.
They were designed to deliver equity to the CEO of National Bank of New Zealand and were issued to meet the particular needs and circumstances at the time of the acquisition of NBNZ.
Refer to section C7 for further details pertaining to the $1,000 ESAP8

E Funke Kupper was the Managing Director of Personal Banking & Wealth Management Australia prior to 1 May 2004

9

BC Hartzer was the Managing Director of Consumer Finance prior to 1 May 2004

10 Amortisation of other equity allocations for S Targett relates to the grant of deferred shares (four tranches of $700,000 to be issued at 6 month intervals in approximately April and October each year,
subject to Board approval and continued employment) and hurdled options (refer to section C5.2.1 for performance hurdle details) to compensate S Targett for the loss of access to equity as a resultof his resignation from his previous employer

10 I financial report

SECTION B. NON-EXECUTIVEDIRECTORS' REMUNERATION
B1. NON-EXECUTIVE DIRECTORS'REMUNERATION POLICY
Non-executive directors' fees are reviewed
annually and are determined by the Boardof Directors based on advice from external
advisors and with reference to fees paid toother non-executive directors ofcomparable companies.
Non-executive directors' fees are within
the maximum aggregate limit agreed toby shareholders at the Annual General
Meeting held on 13 December 2002($2.5 million, excluding retirement
allowances), and are set at levels thatfairly represent the responsibilities of,and the time spent by, the non-executive
directors on Group matters.
Directors receive a fee for being a directorof the Board, and also additional fees for
either chairing or being a member of acommittee. Special work on committees
may attract additional fees, of an amountconsidered appropriate in thecircumstances. An additional fee is also
paid if a non-executive director serves asa director of ANZ National Bank Limited,
ING Australia Ltd or Metrobank Card
Corporation.

B2. NON-EXECUTIVE DIRECTORS'RETIREMENT POLICY
All non-executive directors participate in
the ANZ Directors' Retirement Scheme.
Under this scheme, a lump-sum retirement
benefit is payable to non-executive directors
upon their ceasing to be a director.
The lump-sum retirement benefit payable
where the non-executive director has held
office for 8 years or more is equal to thetotal remuneration (excluding retirement
benefit accrual) of the non-executive
director in respect of the 3 years
immediately preceding the non-executive
director ceasing to be a non-executive
director. This benefit is funded in partby the balance held, if any, on the
non-executive director’s behalf in the
ANZ Staff Superannuation Scheme.
For periods of less than 8 years, a
proportionate part of such emoluments ispayable. The non-executive directors are
not entitled to the statutory entitlementsof long service leave and annual leave.
Consistent with Principle 9.3 of theAustralian Stock Exchange (ASX) Corporate
Governance Rules, which states that
non-executive directors should not beprovided with retirement benefits otherthan statutory superannuation, the ANZ
Directors' Retirement Scheme is being
reviewed and it is currently planned to bediscontinued after 30 September 2005.

The fee structure is illustrated in
the table below:
Role

Current Fee

ChairmanNon-executive director
Committee Chair1
Committee Member1$429,000$130,000$32,500$9,750

1 Except Nominations & Corporate Governance Committee,
where the current Chair and Member Fees
are $21,000 and $6,300 respectively.

Directors may elect to take all or part oftheir fees in shares under the Directors'
Share Plan (refer to section B3 for moredetails).
For details of emoluments paid to
directors for the year ended
30 September 2004, refer to theRemuneration tables in section Aof this Remuneration Report.

B3. DIRECTORS’ SHARE PLAN
The Directors' Share Plan is available toboth non-executive and executive
directors. Directors may elect to forgo
remuneration to which they may haveotherwise become entitled and receive
shares to the value of the remuneration
forgone. Participation in the plan isvoluntary and therefore the sharesacquired are not subject to performance
conditions.
Shares acquired under the plan arepurchased on market and are held in trust
for up to 10 years. The director selects a
restriction period of between 1 and 10
years during which the shares cannot be
traded. The shares are subject toforfeiture for serious misconduct.
All costs associated with the plan are
met by the Company.

financial report I 11

SECTION C. REMUNERATIONSTRUCTURE
C1. EXECUTIVE REMUNERATIONPHILOSOPHY AND OBJECTIVESANZ's reward policy guides theCompensation Committee andmanagement in shaping remuneration
strategies and initiatives.
The following philosophies underpin ANZ's
reward policy:
1. Focus on creating and enhancing value
for ANZ's shareholders;
2. Differentiation of individual rewards
commensurate with contribution to overall
results and according to individual
accountability, performance and potential;
3. Significant emphasis on "at risk"
components of total rewards linked to theenhancement of shareholder value throughimprovements in Economic Value Added™
(EVA™); and4. The provision of a competitive reward
proposition to successfully attract, motivate
and retain the high quality workforce
required to deliver ANZ's business andgrowth strategies.
During 2004 a comprehensive review of
reward structures has been conductedagainst the backdrop of these philosophies
and against the Company's growth strategy
and corporate governance principles.
As a result, a number of changes to reward
structures are planned for the first half ofthe 2005 financial year. These changes
are detailed in section C5 of thisRemuneration Report.

C2. COMPENSATION COMMITTEEThe Compensation Committee has a charter
which details the terms of reference underwhich the Committee operates. The Chartercan be found on anz.com > about ANZ(listing at top of screen) > Corporate
Information > ANZ Policies > Corporate
Governance and Policies.
The role of the Compensation Committee
is detailed on page 50 of the Corporate
Governance Report.
On a number of occasions throughout theyear, both the Compensation Committee
and management received external advice
on matters relating to remuneration. The
following advisors were used: Hay Group;
Blake Dawson Waldron; Freehills; Mercer
Human Resource Consulting; andPricewaterhouseCoopers.

C3. REMUNERATION STRUCTURE
OVERVIEW
ANZ's reward structures are designed tomeet the needs of the specialised
business units as well as the markets inwhich they operate. As a result, the mix of
remuneration components can vary acrossthe organisation although, wherepracticable, ANZ applies structures andopportunities on a consistent basis for
similar roles and levels. There is a strongemphasis on variable pay opportunities
with total employee remunerationdifferentiated significantly on the basisof performance.
The executive remuneration program isdesigned to support the reward
philosophies detailed in section C1, and tounderpin the Company’s growth strategy.
This program aims to differentiate
remuneration on the basis of achievement
against both individual, business unit andgroup performance targets which arealigned to sustained growth inshareholder value.
The program comprises the following
components:> Fixed remuneration component:salary, non-monetary benefits andsuperannuation contributions.
> Variable or "at risk" component:- Short-Term Incentive (STI); and- Long-Term Incentive (LTI),
which consists of options anddeferred shares
The relative weighting of fixed andvariable components, for target
performance, is set according to the sizeor market of the executive's role, with theproportion of remuneration "at risk"increasing for the most senior or complex
roles, or for those roles where there isstrong market pressure to provide greaterlevels of remuneration. Compared to themarket, fixed remuneration levels aredesigned to be around median, as are thevariable components - STI and LTI - except
in cases of superior performance where
total remuneration is designed to reflect
the upper range of competitive market
levels. In this way the remuneration
structure is heavily weighted towards"reward for performance".

C4. FIXED REMUNERATION
For most executives, fixed remunerationconsists of what is referred to as Total
Employment Cost (TEC). TEC comprises a
notional cash salary, a superannuation
contribution (calculated as 9% of thenotional salary except for Sir J Anderson
who receives a superannuation
contribution equal to one eleventh of TEC)
and the remainder as cash or nominatedbenefits. The types of benefits that canbe packaged by executives include
novated car leases, additional
superannuation contributions, car parking,child care and contributions towards the
Employee Share Save Scheme (see note
50 of the 2004 Financial Report for detailsof the Employee Share Save Scheme).
To ensure fixed remuneration for theCompany's most senior executives
remains competitive, the TEC componentof executive compensation is reviewed
annually based on performance andmarket data, with the level targeted toaround the market median being paid in
the finance industry in the relevant global
markets in which ANZ operates.
International remuneration levels are
considered in assessing market
competitiveness where an executive's
primary place of residence is (or has been)outside of Australia or New Zealand, inwhich case the local market is considered.

12 I financial report

C5. VARIABLE REMUNERATION
Variable remuneration forms a significant
part of executives' potential remuneration,
providing an at-risk component that isdesigned to drive performance in both theshort-term (semi annually or annually)
and in the long-term (over 3 years or more).
The opportunities available to executives
under ANZ's variable reward programs arecalibrated to reflect executives' potential
impact on the business; to manageinternal relativities; and to ensurecompetitiveness in the relevant markets
in which they operate.
Most executives participate in the
short-term incentive scheme detailed in
section C5.1. All executives participate
in the long-term incentive plan detailed in
section C5.2, subject to individual
performance thresholds. In some instances,
customised short-term incentive plans will
exist that executives may participate in toensure more precise alignment withbusiness objectives and market practice.
No executives however, may participate inmore than one short-term incentive plan.
C5.1 Short-term Incentives
Short-term incentive (STI) payments
encourage executives to support ANZ's
strategic objectives by providing rewards
that are significantly differentiated on thebasis of achievement against performancetargets. Most executives participate in thescheme explained below. All short-term
incentive schemes are reviewed by theCompensation Committee.
The size of STI payments are based, firstly,
on overall group and business unit
performance results against a balanced
scorecard and, secondly, on individual
performance against financial andnon-financial measures.
> Group and business unit performanceis assessed against a number ofqualitative and quantitative measuresconsistent with the ANZ Balanced
Scorecard Approach. Measures include
but are not limited to:> Change in Economic Value
Added (EVATM);> Customer Satisfaction;> Employee Engagement;> Risk Management; and> Compliance.
Performance against these measures
influences the size of the incentive poolavailable to individuals within eachbusiness unit.

> For individual performance, executives
are ranked against their peers, with better
relative performance attracting a greater
proportion of the incentive pool.
Individual Key Result Areas (KRAs) are set
annually to support the Company
objectives stated in the Balanced
Scorecard noted above, and performanceagainst these KRAs is used as an input toassessing relative ranking.
Up until May 2004, STI payments havebeen made each half year and a portion ofthem have been paid in shares deferredfor 3 years (STI deferred shares).
STI deferred shares have the following
conditions attached:> Shares are subject to a time-based
vesting hurdle of 3 years, during whichtime they are held in trust;> During the deferral period, shares
attract dividends that are paid directly tothe employee; and> Shares issued under this plan may beheld in trust for up to 10 years.
The value used to determine the number
of STI shares to be allocated has been
based on the volume weighted average
price of the Company’s shares traded on
the ASX in the week leading up to andincluding the date of issue.
From October 2004, performance willcontinue to be measured every 6 months,
but payments will be made annually.
Furthermore, bonuses are to be paid
100% in cash (except where specificbusiness schemes require otherwise, or
executives elect to receive shares in lieu).
This change, together with the changes
being made to our long-term incentive
program, is designed to increase thecompetitiveness and clarity of purpose of
the Company's reward structures.
C5.2 Long-term Incentives
Long-term incentives (LTIs) are used as amechanism to link a significant portion of
executives' compensation to theattainment of sustained growth inshareholder value. The size of LTI grants isdetermined by the Company’s
performance and an individual's level of
responsibility, performance and theassessed potential of the executive.
Allocations have typically been made in or
around April and October each year,
although after 2004 the grants will bemade annually in or around November.

There are two components to LTI, eachmaking up approximately half of theannual LTI grant value:> Options; and> Deferred Shares.
Upon exercise, each option entitles theoption holder to one ordinary share.
The conditions under which shares andoptions are granted are approved by the
Board in accordance with the rules of both
the ANZ Employee Share Acquisition Plan
and the ANZ Share Option Plan.
Performance conditions are explained in
more detail below, including changes
planned for the coming year.
C5.2.1 Options
Options are designed to reward executives
for share price growth dependent upon
the Company's Total Shareholder Returnoutperforming peers. Each option has thefollowing features:> An exercise price (or for index-linked
options, the original exercise price) that is
set equal to the weighted average saleprice of all fully paid ordinary shares in
the Company sold on the Australian Stock
Exchange during the 1 week prior to andincluding the date of grant1;> A maximum life of 7 years and an
exercise period that commences after
3 years2, subject to performance hurdles
being cleared. Options are re-tested
monthly (if required) after thecommencement of the exercise period;> Upon exercise, each option entitles theoption-holder to one ordinary share;> In case of resignation or termination on
notice or dismissal for misconduct:
options are forfeited;> In case of redundancy: options are pro
rated and a grace period of 3 months isprovided in which to exercise theremaining options (with hurdles waived,
if applicable);> In case of retirement, death or total &permanent disablement: A grace period of
3 months is provided in which to exercise
all options (with hurdles waived, if
applicable); and> Performance hurdles, which are
explained below for each type of option.
1 For options granted to the CEO, the exercise price is equal
to the weighted average share price during the 5 trading
days immediately before or after the Company's Annual
General Meeting that immediately precedes the allocation.
2 For options granted to the CEO, the life and exercise period
may differ, as disclosed in the tables of the year in which
they are granted.

financial report I 13

Hurdled options (granted from February
2000 until July 2002, and from November
2003 until May 2004)
Until May 2004, hurdled options were
granted with the following performance
hurdles attached:
1. Half the options may only be exercised
once the ANZ Total Shareholder Return(ANZ TSR) exceeds the percentage change
in the S&P/ASX 200 Banks (Industry
Group) Accumulation Index, measured
over the same period (since issue) andcalculated as at the last trading day of any
month (once the exercise period hascommenced); and2. The other half of hurdled options may
only be exercised once the ANZ TSR
exceeds the percentage change in the
S&P/ASX 100 Accumulation Index,
measured over the same period (sinceissue) and calculated as at the last trading
day of any month (once the exercise
period has commenced).
These hurdles were originally selected toensure rewards were aligned with shareprice growth in a manner that was easy tounderstand and which took into accountperformance relative to the market. At thetime of implementation these hurdles
were in line with market practice.
Index-linked options (granted from
October 2002 to May 2003)
Index-linked options have a dynamic
exercise price that acts as a built-in
performance hurdle, ie the exercise priceis adjusted in line with the movement in
the S&P/ASX 200 Banks (Industry Group)
Accumulation Index (excluding ANZ).
As an additional constraint, the adjusted
exercise price can only be set at or above
the original exercise price. Index-linked
options ensure that executives are only
rewarded for the true out-performance of
ANZ's share price over and above themovement in the related index. They are
exercisable between the 3rd and 7th year
after grant date, subject to the adjusted
exercise price being above the prevailingshare price.

Hurdled options (to be granted from
November 2004)
From November 2004, the hurdles
attached to options will change.
The proportion of options that become
exercisable will depend upon the TSR
achieved by ANZ relative to the companies
in the comparator group shown below.
Performance equal to the median TSR of
the comparator group will result in half theoptions becoming exercisable.
Performance above median will result infurther options becoming exercisable,
increasing on a straight-line basis until allof the options become exercisable where
ANZ TSR is at or above the 75th percentile
in the comparator group. These new
performance hurdles are more consistent
with current market practice in thefinancial services industry and are alignedwith the Company’s strategic focus on
growth.
Comparator Group
National Australia Bank St George Bank
Commonwealth Bank
WestpacQBE
AMP
AXA Asia Pacific
IAG
Suncorp Metway
Macquarie
C5.2.2 Deferred Shares (LTI)
Deferred Shares granted under the longterm incentive arrangements are designed
to reward executives for superior growthwhilst also encouraging retention and anincrease in the Company’s share price.
> Shares are subject to a time-based
vesting hurdle of 3 years, during whichtime they are held in trust;> During the deferral period, the employee
is entitled to any dividends paid on theshares;> Shares issued under this plan may beheld in trust for up to 10 years;> The value used to determine the numberof LTI deferred shares to be allocated has
been based on the volume weighted
average price of the shares traded on the
ASX in the week leading up to andincluding the date of issue;> In case of resignation or termination on
notice or dismissal for misconduct: LTI
shares are forfeited;> In case of redundancy: the number of
LTI shares that are released is pro rated
according to the time held as a proportionof the vesting period; and> In case of retirement, death or total &permanent disablement: LTI shares are
released to executives.

14 I financial report

C6. PERFORMANCE OF ANZ
The following table shows how ANZ's Total Shareholder Return (TSR, which includes share price growth, dividends and other capitaladjustments) has performed against two comparator groups, measured from various dates (which approximately coincide with previous
major option allocations) to 30 September 2004. The measure shown ("ANZ out-performance against the index") is intended to demonstrate
the link between company performance and the value delivered to executives as part of the long-term incentive arrangements (ie themeasure reflects the hurdle attached to previously granted hurdled options, as explained under section C5.2.1).

Measurement Period

1 Apr 04- 30 Sep 04
1 Oct 03 - 30 Sep 04
1 Apr 03- 30 Sep 04
1 Oct 02 - 30 Sep 04
1 Apr 02- 30 Sep 04
1 Oct 01 - 30 Sep 04
1 Apr 01- 30 Sep 04
1 Oct 00 - 30 Sep 04
1 Apr 00- 30 Sep 04
1 Oct 99 - 30 Sep 04

ANZ out-performance against
S&P/ASX 100 Accumulation Index1

ANZ out-performance against
S&P/ASX 200 Banks Accumulation Index1,2

Number of months

Measured point-to-point

Measured point-to-point

6
12
18
24
30
36
42
48
54
60

-7%
-3%
-16%
-11%
9%
8%
39%
52%
98%
91%

6%
10%
6%
10%
15%
6%
32%
31%
51%
63%

1 Out-performance is measured in absolute percentage points by which the Company's TSR has exceeded or lagged the relevant accumulation index, over the measurement period,eg the Company's TSR from 01 Oct 99 to 30 Sep 04 was 146.3%, whilst the S&P/ASX100 Accumulation Index grew by 55.8% in the same period. This represents a 91% out-performanceby the Company
2 The Banking and Finance Accumulation Index is used instead of the S&P/ASX 200 Banks (Industry Group) Accumulation Index for any portion of a performance period extending
before April 2000

C7. OTHER EMPLOYEE SHARE SCHEME$1,000 Employee Share Acquisition Plan
All permanent employees (other than the most senior executives) who have had continuous service for one year with the Company or any of
its controlled entities may be eligible to participate in a scheme enabling the issue of up to $1,000 of shares to an employee in eachfinancial year, subject to the approval of the Board. The shares are retained in trust for a three-year vesting period. On expiration of that
period, an employee may generally sell the shares, transfer them into their name, or have them retained in the trust. On termination,
the shares are generally transferred into the employee's name. Forfeiture provisions may apply outside of Australia, depending on thejurisdiction.
The Company has made six offers under the $1,000 Employee Share Acquisition Plan, with a seventh scheduled for December 2004.
A total of 8,258,575 shares have been granted under the plan as at 30 September 2004.

financial report I 15

SECTION D. CHIEF EXECUTIVEOFFICER'S REMUNERATION

D2. CEO'S CONTRACT TERMS

D1. CEO REMUNERATION OVERVIEW

On 26 October 2004, the Company
announced an extension to J McFarlane's
contract:

The structure of J McFarlane's
compensation, which is in accordancewith his agreement, is as follows:> The term of the contract will be
extended by one year to
30 September 2007;> Fixed Compensation: Consists of salary,
benefits and superannuation
contributions. Since October 2003,
J McFarlane has elected to receive almost
all of his Fixed Compensation in the formof shares purchased under the Directors'
Share Plan.

> In addition to mandatory
superannuation contributions, theCompany will make additional employer
contributions of $300,000 per annum(effective from 1 October 2003), paid
quarterly to J McFarlane's chosen
superannuation fund; and> Short-Term Incentive: J McFarlane's
Short-Term Incentive is based on theGroup's EPS Growth and EVATM
performance against target and an annual
assessment of J McFarlane's achievementof specific objectives agreed with theBoard. J McFarlane's Short-Term Incentive
may be paid in cash or in sharespurchased under the Directors' SharePlan. J McFarlane has typically elected
to receive shares.

> Subject to shareholder approval at theAnnual General Meeting in December 2004,
it is proposed that J McFarlane be offered
175,000 Performance Shares, describedin section D4.

> Long-Term Incentive: J McFarlane'sLong-Term Incentive was approved byshareholders at the Annual General
Meeting in December 2001. Four tranchesof options were approved for granting by
the Board: 500,000 in 2001; 1,000,000 in
2002; 1,000,000 in 2003 and 500,000 in
2004. The exercise of these options issubject to performance hurdles being
satisfied. J McFarlane's specificperformance hurdles, for options granted
during the year, are indicated in section F3.
Subject to shareholder approval at theAnnual General Meeting in December
2004, it is proposed that J McFarlane beoffered 175,000 Performance Shares aspart of his contract extension.
The conditions attached to these
Performance Shares are explained in
section D4 below.
The compensation of J McFarlane for theyear ended 30 September 2004 is set out
in Section A of this Remuneration Report.

A separate agreement, made on
23 October 2001, provides forreimbursements to J McFarlane for any
additional tax liabilities that may arise on
his UK Pension Plan holdings as a result of
his continuing Australian residency.
Under this agreement, ANZ reimburses
J McFarlane for any additional tax liability
incurred on his UK Pension Plan during his
employment with ANZ, arising as aconsequence of Australian Foreign
Investment Fund rules. In the event ofdecreased Australian tax liabilities due toa decreased value in J McFarlane's UK
Pension Plan, the reduced liability will be
used to offset potential subsequent
reimbursements.

D3. CEO'S RETIREMENT AND
TERMINATION BENEFITS
In accordance with J McFarlane's contract
variation (refer section D2), J McFarlane's
nominated superannuation fund receives$300,000 per annum (effective from
1 October 2003, paid quarterly) in
addition to mandatory superannuation
contributions.
J McFarlane can terminate his employment
agreement by providing 12 months'
notice. ANZ may terminate theemployment agreement by providing
notice equal to the unexpired term of theemployment agreement (which ends on
1 October 2007). If ANZ terminates theemployment agreement without noticeand thus breaches its obligation toprovide the required notice, ANZ has
agreed with J McFarlane that the damages
payable by ANZ for breach of contract
would be equal to the Total Employment
Cost (TEC) that would otherwise bereceived over the remainder of thecontract (TEC comprises salary or fees,
non-monetary benefits and mandatory
superannuation contributions).
In circumstances of serious misconduct,
J McFarlane is only entitled to payment of
TEC up to the date of termination.
Payment of accumulated superannuation
benefits plus statutory entitlements oflong service leave and annual leave(calculated on the basis of salary or fees)
applies in all events of separation.
In the event of resignation not approvedby the Board or dismissal for serious
misconduct, all unexercised options will
be forfeited. In the event of termination on
notice, all option grants may be exercised.
Upon separation, option entitlements
must be exercised within 6 months oftermination. In the event of serious
misconduct, shares held in the Directors'
Share Plan will be forfeited.
On resignation or termination on notice,
shares will be released.

16 I financial report

D4. ALLOCATION OF PERFORMANCESHARES (DECEMBER 2004)

D5. CEO'S PARTICIPATION IN
EQUITY PROGRAMS

Subject to shareholder approval, 175,000
Performance Shares will be issued to
J McFarlane on 31 December 2004.
No dividends will be payable on theshares until they vest. Vesting will be
subject to the following time andperformance hurdles being satisfied:J McFarlane participates in the Directors'
Share Plan, which is explained in section
B3. Refer to section F for details of grants
and holdings.

> The performance hurdle will bemeasured during the performance period
by comparing ANZ's Total Shareholder
Return (ANZ TSR) with that of a comparatorgroup of selected major financial services
companies in the S&P/ASX 100 Index,
excluding ANZ. The companies to be usedin the comparator group will be as
approved by the Board.
> The percentage of Performance Sharesthat will vest will depend upon the TSR
achieved by ANZ relative to the companies
in the comparator group. Performanceequal to the median TSR of thecomparator group will result in half the
Performance Shares vesting. For eachpercentile above the median an additional
2% of Performance Shares will vest,
increasing on a straight-line basis until allof the Performance Shares vest where
ANZ TSR is at or above the 75th percentileof TSRs in the comparator group.
> TSR will be measured for ANZ and thecomparator group over the same period(since grant) and calculated as at the last
trading day of any month, once theperformance period has commenced.
The first opportunity for Performance
Shares to vest will be after the second
anniversary of grant, after which the
Performance Shares will continue to betested monthly until they are forfeited
5 years after the grant date, or 100% vest,
whichever is the earlier.
Performance Shares will be forfeited ifthey have not vested five years after grant
or if J McFarlane ceases to be an employeeof the Company by reason of serious
misconduct. If J McFarlane resigns
without the prior approval of the Board,unvested Performance Shares
will be forfeited.

J McFarlane also participates in the ANZ
Share Option Plan, which is described in
section C5.

financial report I 17

SECTION E. SPECIFIED EXECUTIVES' CONTRACT TERMS
Contractual terms for most executives are similar, but do, on occasions, vary to suit different needs.
Section E1 details the contractual terms for those Specified Executives who are on open-ended contracts. Section E2 details the contractual
terms for Sir J Anderson, who is on a fixed term contract.

E1. OPEN-ENDED CONTRACTS (RJ EDGAR, E FUNKE KUPPER, BC HARTZER, PJO HAWKINS, PR MARRIOTT, S TARGETT)
Length of Contract

Open-ended.

Fixed Compensation

The Total Employment Cost (TEC) package consists of salary, mandatory employer superannuation
contributions and benefits.

STI

Eligible to participate. Target opportunity of 66.67% of Total Employment Cost (refer to section C5.1
for details of short-term incentive arrangements).

LTI

Eligible to participate at the Board’s discretion - refer to section C5.2 for long-term incentive
arrangements.

Resignation

Employment may be terminated by giving 6 months' written notice.
On resignation any options and unvested deferred shares will be forfeited.
As a result of being employed by ANZ prior to November 1992, RJ Edgar and PJO Hawkins are eligible
to receive a Retirement Allowance on resignation for illness, incapacity, or domestic reasons; refer toOther Aspects (below) for more details.

Retirement

On retirement, shares and options are generally released in full, although this is only stated in thecontracts of E Funke Kupper (for shares) and PR Marriott (both shares and options). Furthermore,
PR Marriott is entitled to a bonus on retirement, pro-rated for the proportion of the final performance
period that is worked prior to cessation of employment, and subject to adjustment for performance inaccordance with the short-term incentive arrangements in place at the time. As a result of being
employed by ANZ prior to November 1992, RJ Edgar and PJO Hawkins are eligible to receive a
Retirement Allowance on retirement; refer to Other Aspects (below) for more details.

Termination on Notice by ANZANZ may terminate the employment agreement by providing 12 months' written notice or payment inlieu of the notice period based on TEC.
On termination on notice by ANZ, any options or LTI deferred shares that have vested, or will vest
during the notice period will be released, in accordance with the ANZ Share Option Plan Rules.
LTI shares that have not yet vested will generally be forfeited, although for some executives(E Funke Kupper, BC Hartzer and PR Marriott) these shares will be released in full. Deferred shares
granted under STI arrangements will vest in full for all executives.
Discretion to pay bonuses on a pro-rata basis (depending on termination date, and subject tobusiness performance) applies in most cases, but is contracted for BC Hartzer and PR Marriott.

Redundancy

If ANZ terminates employment for reasons of bona fide redundancy, a severance payment will bemade that is equal to 12 months TEC.
All STI deferred shares are released. All options granted since 24 April 2002 are released on a pro-ratabasis - all prior grants may be exercised. All LTI deferred shares granted since 23 October 2002 arereleased on a pro-rata basis - all prior grants will vest.
Discretion to pay bonuses on a pro-rata basis (depending on termination date, and subject tobusiness performance) applies in most cases, but is contracted for BC Hartzer and PR Marriott.
As a result of being employed by ANZ prior to November 1992, RJ Edgar and PJO Hawkins are eligible
to receive a Retirement Allowance on retrenchment; refer to Other Aspects (below) for more details.

Death or Total andPermanent Disablement

All options and shares released; pro-rata bonus.
As a result of being employed by ANZ prior to November 1992, RJ Edgar and PJO Hawkins are eligible
to receive a Retirement Allowance on death; refer to Other Aspects (below) for more details.

Termination for serious misconduct

ANZ may terminate the employment agreement at any time without notice, and the employee will only
be entitled to payment of TEC up to the date of termination. On termination for serious misconduct,any options, unvested deferred shares or vested deferred shares still held in trust will be forfeited.

18 I financial report

Other Aspects

S Targett: subject to continuing employment and the approval of the Board, four tranches of deferred shares(sign-on deferred shares), each worth $700,000, are to be granted at six month intervals in or around April
and October each year, and Hurdled Options (sign-on options) worth $750,000 are to be granted within
3 months of commencement of employment, to compensate for the loss of equity from S Targett's previous
employer. On termination on notice, a pro-rata proportion of the sign-on options can be exercised, basedon the period of employment, and sign-on deferred shares will vest in full, including any scheduled to be
granted during the notice period.
PJO Hawkins: for the period ending 31 December 2005, any payments on cessation of employment(including payout of accrued but untaken Long Service Leave) will be based on a TEC of $750,000.
In instances where a retirement allowance is payable under ANZ policy (ie for RJ Edgar andPJO Hawkins in instances of retirement, death, retrenchment or resignation for illness, incapacity,or domestic reasons), the retirement allowance is calculated as follows: 3 months of notional salary(which is 65% of TEC) plus an additional 3% of notional salary for each year of full time service above
10 years, less the total accrual value of long service leave (including taken and untaken).

financial report I 19

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

Ends 30 September 2005.

Fixed Compensation

The Total Employment Cost (TEC) package is inclusive of employer contributions to thesuperannuation fund.

STI

Short term incentive payments are subject to both business and individual performance.
The target payment is 50% of TEC.

LTI

Fixed at NZD500,000 worth of zero-priced options annually, granted in two tranches per annum.
The share options can be exercised at any time during employment and within 6 months ofthe termination of employment.

Resignation

Sir J Anderson may terminate his employment by giving 12 months' written notice. On resignation,
any share options which have not been exercised as at the termination date are forfeited.

Retirement

A policy for payment of retirement gratuities was in place with NBNZ employees prior to theacquisition by the Company of NBNZ. This policy has been continued for eligible staff who were
ANZ National Bank Limited employees as at 1 December 2003, including Sir J Anderson. Under thispolicy, a payment will be made to Sir J Anderson on his retirement that is equal to the number of fullyears' service divided by 35 and multiplied by 85% of finishing salary (where finishing salary is fixed
remuneration less any superannuation contribution). This value is then grossed up for tax (ie divided
by 0.61) and from this value the total accrual value of long service leave taken is deducted.

Termination on Notice by ANZANZ National Bank Limited may terminate the employment agreement by providing notice or
payment in lieu of notice equal to the unexpired term of the employment agreement(which ends on30 September 2005). On termination on notice by ANZ any options may be exercisedin accordance with the ANZ Share Option Plan Rules.

Death or Total andPermanent Disablement
Terminated for serious misconduct

All shares released; pro-rata bonus.
ANZ National Bank Limited may terminate the employment agreement at any time without notice,and Sir J Anderson will only be entitled to payment up to the date of termination. On termination forserious misconduct any share options which have not been exercised as at the termination date may
not be exercised.

E3. PARTICIPATION IN EQUITY PROGRAMS
A number of shares and options are granted to executives under the remuneration programs detailed in Section C. For specified executives,
details of all grants made during the year are listed in Section F. Aggregate holdings of shares and options are also shown.
The deferred shares component of the STI is administered under the ANZ Employee Share Acquisition Plan. For executives, the shares aredeferred for three years, although some employees may receive shares deferred for one year, depending upon the role or jurisdiction.
The deferred shares component of the LTI is also administered under the ANZ Employee Share Acquisition Plan.
The shares are deferred for three years.

20 I financial report

SECTION F. EQUITY INSTRUMENTS RELATING TO DIRECTORS AND SPECIFIED EXECUTIVES
F1. SHAREHOLDINGS OF NON-EXECUTIVE DIRECTORS

Name

Balance ofshares as
at 1 October
20031

Sharesacquired
during the year
in lieu of salary2

Shares acquired
during the year
through theexercise of rights3

Other sharesacquired
duringthe year4

Balance ofshares held
as at 30 Sept
20041,5

Balance ofshares held
as at 4 Nov
20041,6CB Goode
G Clark
JC Dahlsen
RS Deane
JK Ellis
DM Gonski
MA Jackson
DE Meiklejohn
JP Morschel
BW Scott403,334–
105,243
75,00065,367
2,099
78,245n/an/a72,207

14,215
–
–
–
1,097
–
–
n/a
n/a
–

75,922–
16,609364
12,996382
13,861
n/a
n/a
199

8,993
2,000
63
–
5,016
50,131
1,191
n/a
n/a
69

502,464
2,000
121,91575,36484,476
52,612
93,297n/an/a
72,475523,933
2,000
121,91575,364
86,17954,667
93,297
5,502
4,185
72,475

1 Balance of shares held at 1 October 2003, 30 September 2004 and 4 November 2004, includes directly held shares, nominally held shares and shares held by personally related entities
2 All shares acquired in lieu of salary were done so under the Directors' Share Plan (refer to section B3 of this Remuneration Report for an overview of the Directors' Share Plan)
3 Refers to rights arising from the Renounceable Rights Issue that partly funded the acquisition of NBNZ. All ANZ shareholders were eligible to purchase 2 new ordinary shares for every 11 existing
ordinary shares registered in their name as at 31 October 2003. Amounts shown include directly held rights, nominally held rights and rights held by personally related entities. CB Goode, RS Deane,
JK Ellis and DM Gonski exercised their full allocation of rights (nominally held, directly held and rights held by personally related entities) on 28 November 2003.
The following rights were sold: JC Dahlsen - 2,528; MA Jackson - 364; and BW Scott - 12,933
4 Other shares acquired may include those acquired under the Dividend Reinvestment Plan
5 The following shares were nominally held as at 30 September 2004: CB Goode - 114,349; JC Dahlsen - 39,473; RS Deane - 73,000; JK Ellis - 17,197; DM Gonski - 50,000; MA Jackson - 10,632;
BW Scott - 6,563
6 The directors' relevant interest in shares as required by the Corporations Act 2001 is as follows: CB Goode 521,096; G Clark 2,000; JC Dahlsen 107,064; RS Deane 75,364; JK Ellis 83,484;
DM Gonski 54,667; MA Jackson 91,297; DE Meiklejohn 5,502; JP Morschel 4,185; and BW Scott 71,117. Any differences between the balances in this footnote and the table is due to theapplication of AASB 1046

F2. SHAREHOLDINGS OF CEO (INCLUDING MOVEMENTS DURING THE YEAR)
Balance ofshares as at
1 Oct 20031

Sharesacquired
during the year
in lieu of bonus2

Sharesacquired
during the year
in lieu of salary2

Shares acquired
during the year
through the exercise
of options3

Shares acquired
during the year
through the exerciseof rights4

Other sharesacquired during
the year

Total numberof shares
sold during
the year

Balanceof shares
held as at
30 Sep 20041,5

Balanceof shares
held as at
4 Nov 20041,6

1,264,559

42,928103,633

750,000

225,80756,580753,000

1,690,507

1,568,891

1 Balance of shares held at 1 October 2003, 30 September 2004 and 4 November 2004 includes directly held shares, nominally held shares and shares held by personally related entities
2 All shares acquired in lieu of salary or bonus were done so under the Directors' Share Plan (refer to section B3 of this Remuneration Report for an overview of the Directors' Share Plan)
3 All options held/exercised by the CEO have been approved by shareholders (December 1999 and December 2001)
4 Refers to rights arising from the Renounceable Rights Issue that partly funded the acquisition of NBNZ. All ANZ shareholders were eligible to purchase 2 new ordinary shares for every 11 existing
ordinary shares registered in their name as at 31 October 2003. Amounts shown include directly held rights, nominally held rights and rights held by personally related entities
5 945,145 shares were held nominally as at 30 September 2004
6 This also represents the Chief Executive Officer’s relevant interest in shares as required by the Corporations Act 2001

F3. OPTIONS GRANTED TO CEO DURING THE YEAR1
Type ofoptions2

Hurdled (CEO)Grant date

Number granted
during the year

Value per option
at grant date3$

Exercise price4$

Dateexercisable

Expiry date

31 Dec 03

1,000,000

2.11

17.48

31 Dec 05

31 Dec 085

1 All options held/exercised by the CEO have been approved by shareholders (December 1999 and December 2001)
2 One half of the options may be exercised only if the ANZ TSR calculated over the period commencing on the grant date and ending on the last day of any month after the second anniversary of their
grant date exceeds the percentage change in the S&P/ASX 200 Banks (Industry Group) Accumulation Index over that same period; and the other half of the options may be exercised only if the
ANZ TSR calculated over the relevant period exceeds the percentage change in the S&P/ASX 100 Accumulation Index over that same period
3 Refer to section F8 for details of the valuation methodology and inputs
4 The exercise price is equal to the weighted average share price during the 5 trading days immediately after the Company's 2003 Annual General Meeting
5 Treatment of options on termination of employment is explained in section D3

F4. OPTION HOLDINGS OF CEO (INCLUDING MOVEMENTS DURING THE YEAR)1,2
Balance as
at 1 Oct 03

Granted during
the year as
remuneration

Exercisedduring the year

2,750,000

1,000,000

750,000

Date ofexerciseof options

Number ofordinary sharesissued on exercise
of options

Share price ondate of exercise$

Amount paid
per share$

Balance
as at
30 Sep 04

Numbervestedduringthe year

Vested andexercisable
as at
30 Sep 04

1 Jul 04
2 Jul 04

100,000
650,000

18.17
18.14

14.06
14.06

3,000,000

1,250,000

500,000

1 All options held/exercised by the CEO have been approved by shareholders (December 1999 and December 2001)
2 This table does not include the 225,807 rights arising from the Renounceable Rights Issue that partly funded the acquisition of NBNZ. All ANZ shareholders were eligible to purchase
2 new ordinary shares for every 11 existing shares registered in their name as at 31 October 2003. The CEO chose to exercise all of his rights on 28 November 2003

financial report I 21

F5. DEFERRED SHARES GRANTED TO SPECIFIED EXECUTIVES DURING THE YEAR

NameType ofdeferredshare1

Number ofdeferred shares
granted Nov 032

Value ofdeferred shares
granted Nov 033$

Number ofdeferred shares
granted May 044

Value ofdeferred shares
granted May 043$

Number of otherdeferred shares
granted during
the year

Value of otherdeferred shares
granted during
the year$

Sir J Anderson (app 1 Dec 2003)5

Other

–

–

–

–

55

991

Dr RJ Edgar

STI
LTI

6,781
33,889118,982594,627

7,683
8,452

140,073
154,093––––

E Funke Kupper

STI
LTI

7,636
6,838

133,984
119,982

7,052
6,256

128,569
114,056––––

BC Hartzer

STI
LTI

7,322
7,408

128,474
129,983

7,244
7,135

132,069
130,082––––

PJO Hawkins

STI
LTI

7,123
7,522

124,982
131,983

6,860
6,586

125,068
120,073––––

PR Marriott

STI
LTI

7,978
9,573

139,985
167,971

9,604
9,275

175,096
169,097––––

S Targett (app 5 May 2004)6

Other

–

–

–

–

38,419700,437

1 Deferred shares issued as STI shares are granted under the ANZ Short-Term Incentive program. Deferred shares issued as LTI shares are granted under the ANZ Long-Term Incentive program.
The shares are restricted for 3 years and may be held in trust for up to ten years. Refer to section C5 for more details
2 Shares granted in November 2003 were in relation to incentives earned for the half year ended 30 September 2003
3 The value per share used in this calculation is the volume weighted average price of the Company’s shares traded on the ASX on the day the shares were granted
4 Shares granted in May 2004 were in relation to incentives earned for the half year ended 31 March 2004
5 Other shares issued (3 March 2004) to Sir J Anderson during the year relates to the $1,000 Employee Share Acquisition Plan. Refer to section C7 for further details
6 Other shares issued to S Targett relates to the issue of deferred shares (four tranches of $700,000 to be issued at 6 month intervals in approximately April and October each year, subject to Board
approval and continuing employment) to compensate S Targett for the loss of access to equity as a result of his resignation from his previous employer

F6. AGGREGATE SHAREHOLDINGS OF SPECIFIED EXECUTIVES
Balanceof shares as at
1 Oct 031

Sharesgrantedduring the year
as remuneration2

Number of sharesacquired during theyear through theexercise of options

Shares acquired
during the year
through theexercise of rights3

Other sharesacquired
duringthe year4

Total numberof shares soldduring the year

Balanceof shares
held as at
30 Sep 20041,5

Numbervested during
the year

Sir J Anderson(app 1 Dec 2003)–
Dr RJ Edgar
255,114
157,051
E Funke Kupper6
BC Hartzer
75,148PJO Hawkins
1,149,754
PR Marriott
539,989
S Targett (app 5 May 2004)–

55
50,024
20,146
21,787
20,96828,452
38,419

11,96795,000365,000
60,000170,000
250,000––
37,295
175
13,665
209,048
460
–

–
6,781
7,636
7,781
7,123
8,966
–

–
60,000365,000
99,335170,000
150,000–

12,022384,214185,008
79,046
1,386,893
677,867
38,419–25,482
44,97927,072
41,46240,381–Name

1 Balance of shares held at 1 October 2003 and 30 September 2004, include directly held shares, nominally held shares and shares held by personally related entities
2 STI shares granted on 5 November 2003 have not been included in these figures as they related to the half year ended 30 September 2003. Instead, these shares have been reflected in the“Other shares acquired during the year” column
3 Refers to rights arising from the Renounceable Rights Issue that partly funded the acquisition of NBNZ. All ANZ shareholders were eligible to purchase 2 new ordinary shares for every 11 existing
ordinary shares registered in their name as at 31 October 2003. Amounts pertaining to the rights issue include directly held rights, nominally held rights, and rights held by personally related entities
4 Other shares acquired include those acquired through the Dividend Reinvestment Plan and STI shares granted on 5 November 2003 in relation to the half year ended 30 September 2003
5 The following shares were held nominally as at 30 September 2004: Sir J Anderson - 55; RJ Edgar - 180,991; E Funke Kupper - 183,224; BC Hartzer - 69,480; PJO Hawkins - 233,821;
PR Marriott - 230,817; S Targett - 38,419
6 Amounts shown do not include ANZ Stapled Exchangeable Preferred Securities (ANZ StEPS). E Funke Kupper held 500 ANZ StEPS as at 1 October 2003; this holding remained unchanged up to andincluding 30 September 2004

22 I financial report

F7. OPTIONS GRANTED TO SPECIFIED EXECUTIVES DURING THE YEAR
Type ofoptions1

Number granted
during the year2

Grant date

Value per option
at grant date3$

Exercise price
$

Name

Date
exercisable

Expiry date4

Sir J Anderson (app 1 Dec 2003)

Zero priced5

11,96711 May 04

18.23

–

11 May 04

10 May 06

Dr RJ Edgar

HurdledHurdled66,666
63,1155 Nov 03
11 May 04

2.34
2.44

17.55
18.22

5 Nov 06
11 May 07

4 Nov 1010 May 11

E Funke Kupper

HurdledHurdled

51,282
46,7225 Nov 03
11 May 04

2.34
2.44

17.55
18.22

5 Nov 06
11 May 07

4 Nov 1010 May 11

BC Hartzer

HurdledHurdled55,55553,2795 Nov 03
11 May 04

2.34
2.44

17.55
18.22

5 Nov 06
11 May 07

4 Nov 1010 May 11

PJO Hawkins

HurdledHurdled56,41049,1815 Nov 03
11 May 04

2.34
2.44

17.55
18.22

5 Nov 06
11 May 07

4 Nov 1010 May 11

PR Marriott

HurdledHurdled71,794
69,2635 Nov 03
11 May 04

2.34
2.44

17.55
18.22

5 Nov 06
11 May 07

4 Nov 1010 May 11

S Targett (app 5 May 2004)

Hurdled307,337

11 May 04

2.44

18.22

11 May 07

10 May 11

1 For Hurdled options, the following performance hurdles apply: one half of the options may be exercised only if the ANZ TSR calculated over the period commencing on the date of grant and ending on
the last day of any month after the Date exercisable exceeds the percentage change in the S&P/ASX 200 Banks (Industry Group) Accumulation Index over that same period; and the other half of theoptions may be exercised only if the ANZ TSR calculated over the relevant period exceeds the percentage change in the S&P/ASX 100 Accumulation Index over that same period. Refer to section C5.2.1
for further information
2 No additional options were granted in the period up to and including 4 November 2004
3 Refer to section F8 for details of the valuation methodology and inputs
4 Treatment of options on termination of employment is explained in section E
5 Zero priced options are granted under the ANZ Share Option Plan and have a nil exercise price and no time-based vesting criteria. They are specifically designed to deliver equity to Sir J Anderson,
and were issued to meet the particular needs and circumstances at the time of the acquisition of NBNZ

F9. AGGREGATE OPTION HOLDINGS OF SPECIFIED EXECUTIVES (INCLUDING MOVEMENTS DURING THE YEAR)
Balance as
at 1 Oct 03

Granted during
the year as
remuneration

Allocation ofrights arising fromrenounceable rights
issue

n/a

Name

Type

Sir J Anderson(appointed 1 Dec 2003)

Zero-priced1–

11,967

Index-Linked
Hurdled

272,000
170,000–
129,781n/a

n/a

250,000
499,000–
98,004n/an/a28,557

Index-Linked
HurdledRights2

222,000
247,000n/a–
108,834n/a

13,665

Index-Linked
HurdledRights2

183,000
381,000n/a–
105,591n/a

209,048

Index-Linked
HurdledRights2
Other3311,000
668,000
n/a
11,000–141,057n/a–

n/a

307,337

Dr RJ Edgar

Rights2
E Funke Kupper

Index-Linked
HurdledRights2

BC Hartzer

PJO Hawkins

PR Marriott

S Targett(appointed 5 May 2004)

Hurdled

46,38698,185n/a

1 Zero priced options first granted in May 2004, and specifically designed to deliver equity to Sir J Anderson. These options are granted under the ANZ Share Option Plan and have a nil exercise priceand no time-based vesting criteria. They were issued to meet the particular needs and circumstances at the time of the acquisition of NBNZ
2 Refers to rights arising from the Renounceable Rights Issue that partly funded the acquisition of NBNZ. All ANZ Shareholders were eligible to purchase 2 new ordinary shares for every 11 existing
ordinary shares registered in their name as at 31 October 2003. Amounts shown include directly held rights, nominally held rights and rights held by personally related entities
3 Other refers to share options granted to a personally related entity

financial report I 23

F8. OPTIONS VALUATIONS
For options granted in the current year, valuations have been determined in accordance with the fair value measurement provisions of
Accounting Standards AASB 1046 and 1046A. The following table outlines the general assumptions used in the option pricing model.
Option type

HurdledHurdledHurdled (CEO)Zero-priced

Grant date

Option value1$

Exercise price(5 day VWAP)$

Share priceat grant$

ANZ expectedvolatility2

Option term

Vesting period

Expectedlife

Expected
dividends3

Risk freeinterest rate4

5 Nov 03
11 May 04
31 Dec 03
11 May 04

2.34
2.44
2.11
18.23

17.55
18.22
17.48
0

17.13
18.10
17.68
n/a

20.50%
19.00%
20.00%
n/a

7 years
7 years
5 years
2 years

3 years
3 years
2 years
0 years

5 years
5 years
3.5 years
n/a

5.00%
5.40%
5.50%
n/a

5.80%
5.97%
5.56%
n/a

1 The Binomial Option Pricing Model (“the model”) is used to assess the value of ANZ's options (other than zero-priced options, for which the value is the volume weighted average price of theCompany's shares traded on the ASX on the day of the options were granted). The model utilises probability theory to determine the value of an ANZ option based on likely share prices at the expiry
date of the option. In accordance with AASB 1046 and 1046A, the model reflects both the performance hurdles that currently apply to the Hurdled Options and the non-transferability of the options.
Under the terms of the Options, the hurdle conditions (outlined in section C5.2.1) must be met before the options may be exercised during the exercise period
2 Expected volatility represents a measure of the amount by which ANZ's share price is expected to fluctuate over the life of the options. The measure of volatility used in the model is the annualised
standard deviation of the continuously compounded rates of return on the historical share price over a defined period of time preceding the date of grant. This historical average annualised volatility isthen used to estimate a reasonable expected volatility over the expected life of the options
3 In estimating the fair value of the ANZ option grant, expected dividends were included in the application of the model. The expected dividend yield applied to the model was based on an analysis of
ANZ's historical dividend payments and yields
4 The risk-free interest rate is based on the implied yield currently available on zero-coupon bonds issued by the Australian government, with a remaining term equal to the expected life of ANZ's options

Share price ondate of exercise
of options including
rights $Amount paid
per share$

Balance
as at
30 Sep 04

Total
numbervestedduring the year

Vested andexercisable
as at
30 Sep 04

11 May 04

18.10

0.00

–

11,967––60,00035,00037,295n/a
7 Jan 04
14 May 04
28 Nov 03

–

–

9,091

n/a
13.62
12.98
13.00

272,000

17.86
17.62
16.82

204,781–

95,00046,386–––
270,000
95,000175

n/a
12 May 04
12 May 04
28 Nov 03––

28,382

n/a
13.62
12.98
13.00

250,000

18.29
18.29
16.82

232,004–

365,000
28,557–––60,00013,665n/a
2 Feb 04
28 Nov 03

–

17.56
16.82

n/a
13.62
13.00

222,000
295,834––
102,000
13,665–42,000––170,000
209,048n/a
11 Mar 04
28 Nov 03

–

19.20
16.82

n/a
13.62
13.00

183,000
316,591––
250,000
209,048–
80,000––250,000460–

n/a
12 Feb 04
28 Nov 03
n/a

97,725

17.95
16.82

10.48
13.00
n/a

311,000
559,057–
11,000–250,000
98,1856,000–
275,000–
11,000

–

n/a

n/a

307,337––

Exercisedduring the year

Date ofexerciseof options

11,967

Sale of rights
arising fromthe renounceable
rights issue

24 I financial report

THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY

financial report I 25

STATEMENTS OF FINANCIAL PERFORMANCE FOR THE YEAR ENDED 30 SEPTEMBER 2004
Consolidated
2003$m

The Company
2004
2003
$m
$m

Note

2004
$m

Total Income

217,50813,023

12,007

12,081

11,368Interest income
Interest expense2
314,117(8,863)

10,215(5,904)

9,037(5,019)9,054(6,088)

7,378(4,556)

5,254
–
–

4,311
–
–

4,018
566
(392)

2,966
–
–

2,822
–
–

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

2002
$m

Profit from disposal of investments
Other operating income
Share of joint venture profit from ING Australia
Share of associates profit (net of writeoffs)

2
2
2

–
3,246
97
48

–
2,702
55
51

174
2,765
2
29

–
3,027
–
–

–
3,990
–
–

Operating income
Operating expenses

3

8,645
(4,026)

7,119(3,228)6,988(2,905)

5,993(2,878)6,812(2,663)

Profit before doubtful debt provision and income tax
Provision for doubtful debts

15

4,619
(632)

3,891
(614)

4,083
(860)

3,115
(433)

4,149
(465)

3,987

3,277

3,223

2,682

3,684

(1,168)

(926)

(898)

(710)

(616)

Profit after income tax
Net profit attributable to outside equity interests

2,819
(4)

2,351
(3)

2,325
(3)

1,972
–

3,068
–

Net profit attributable to shareholders of the Company1

2,815

2,348

2,322

1,972

3,068

233

(356)

(98)

5

(191)

233

(356)

(98)

5

(191)

3,048

1,992

2,224

1,977

2,877

153.1
149.7

142.4
141.7

141.4
140.4

n/a
n/a

n/a
n/a

Profit before income tax
Income tax expense

Currency translation adjustments, net of hedges after tax
Total adjustments attributable to shareholdersof the company recognised directly into equity
Total changes in equity other than those resulting
from transactions with shareholders as owners

6

Earnings per ordinary share (cents)
Basic
DilutedThe notes appearing on pages 29 to 126 form an integral part of these financial statements
1 The results of 2004 include the impact of these significant items:> Close out of the TrUEPrS swap ($84 million profit after tax);> ING Australia completion accounts ($14 million profit after tax); and> Incremental NBNZ integration costs ($14 million charge after tax)
The results of 2002 include the impact of these significant items:> The sale of businesses to INGA 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 15

26 I financial report

STATEMENTS OF FINANCIAL POSITION AS AT 30 SEPTEMBER 2004
Note

Consolidated
2004
2003
$m
$m

The Company
2004
2003
$m
$m

AssetsLiquid assets
Due from other financial institutions
Trading securities
Investment securities
Net loans and advances
Customers’ liabilities for acceptances
Due from controlled entities
Regulatory deposits
Shares in controlled entities, associates and joint venture entities
Deferred tax assets
Goodwill1
Other assets2
Premises and equipment

9
10
11
12
13
16

6,363
4,781
5,478
7,746
204,962
12,466
–
176
1,960
1,454
3,269
9,158
1,532

6,592
2,427
4,213
4,767
149,465
13,178
–
101
1,814
1,165
160
10,224
1,485

3,744
2,537
4,783
6,117
133,767
12,466
7,338
144
11,517
737
74
5,751
826

3,916
2,143
3,636
3,838
115,530
13,178
5,738
68
8,095
746
87
8,042
897

259,345

195,591

189,801

165,914

7,349
168,557
12,466–
1,914
14,212845
27,602
8,475

6,467
124,494
13,178–1,083
13,611
769
16,572
5,630

5,860
99,811
12,4669,544
1,251
10,890618
25,034
7,680

5,490
90,186
13,178
9,262
546
11,671
614
16,131
5,367

Total liabilities

241,420

181,804

173,154

152,445

Net assets

17,925

13,787

16,647

13,469

8,005
987
579
8,336

4,175
2,212
180
7,203

8,005
987
659
6,996

4,175
2,212
684
6,398

17,90718

13,77017

16,647–

13,469–17,925

13,787

16,647

13,469

17
18
19
20
21
22

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 liabilities3
Provisions
Bonds and notes
Loan capital

23
24

25
26
27
28
29

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

30
30

31

Total shareholders’ equity
Derivative financial instruments
Commitments
Contingent liabilities, contingent assets and credit related commitments

38
47
48

The notes appearing on pages 29 to 126 form an integral part of these financial statements
1 Excludes notional goodwill of $754 million (September 2003: $821 million) included in the net carrying value of ING Australia Limited
2 Includes life insurance investment assets held by NBNZ Life Insurance Limited $65 million (September 2003: $nil).
3 Includes life insurance policy liabilities held by NBNZ Life Insurance Limited $30 million (September 2003: $nil)

financial report I 27

STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE YEAR ENDED 30 SEPTEMBER 2004
2004
$mConsolidated
2003
$m

2002
$m

Balance at start of year
Dividend reinvestment plan
Group employee share acquisition scheme
Group share option scheme
Rights issues

4,175
135
47
86
3,562

3,939
115
48
73
–

3,733
94
55
57
–

4,175
135
47
86
3,562

3,939
115
48
73
–

Balance at end of year

8,005

4,175

3,939

8,005

4,175

2,212
–
(1,225)
–

1,375
987
–
(150)

1,526
–
–
(151)

2,212
–
(1,225)
–

1,375
987
–
(150)

987

2,212

1,375

987

2,212

8,992

6,387

5,314

8,992

6,387

Balance at start of year
Revaluation of investment in controlled entities

31
–

31
–

31
–

401
14

401
–

Total asset revaluation reserve

31

31

31

415

401

Balance at start of year
Currency translation adjustments,
net of hedges after tax
Transfer from general reserve

(239)

117

215

228

419

233
224

(356)
–

(98)
–

5
–

(191)
–

Total foreign currency translation reserve

218

(239)

117

233

228

Balance at start of year
TrUEPrS preference share gain on buy backTransfers (to) from retained profits/FCTR

239
180
(238)

237
–
2

322
–
(85)

55
180
(224)

55
–
–

Total general reserve

181

239

237

11

55

Capital reserve

149

149

149

–

–

Total reserves

579

180

534

659

684

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

7,203
2,815

5,600
2,348

4,562
2,322

6,398
1,972

3,971
3,068

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

10,01814(1,598)
(98)

7,948
(2)
(641)
(102)

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

8,370
224
(1,598)
–

7,039
–
(641)
–

Retained profits at end of year

8,336

7,203

5,600

6,996

6,398

Total shareholders’ equity attributable to shareholders of the Company

17,907

13,77011,448

16,647

13,469Note

The Company
2004
2003
$m
$m

Share capital
Ordinary shares

Preference shares
Balance at start of year
New issues1
Buyback of preference shares
Retranslation of preference shares
Balance at end of year
Total share capital
2

Asset revaluation reserve

3

Foreign currency translation reserve

4

General reserve

4

Retained profits

The notes appearing on pages 29 to 126 form an integral part of these financial statements
1 Relates to the issue of 10 million ANZ Stapled Exchangeable Preferred Securities, raising $1 billion net of issue costs of $13 million. Refer note 30
Nature and purpose of reserves
2 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
3 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
4 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.

28 I financial report

STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED 30 SEPTEMBER 2004
2004
$mConsolidated
2003
$m

2002
$m

14,515
3
3,257(8,258)(2,110)(312)(2,093)
(247)
(19)
514

10,887
7
3,170(5,724)(1,848)(279)(1,952)(1,312)
1
1,669

10,1483
2,637(5,367)(1,900)(268)(1,893)(853)(28)(1,030)

8,744
650
2,008
(5,711)(1,542)(275)(1,087)107(2)(1,147)

7,243
1,803
2,397
(4,372)(1,463)(257)(855)(1,063)
17
1,583

5,250

4,619

1,449

1,745

5,033

(325)
522
(76)
(22,757)
(35)

1,113
(44)
52
(19,944)
(2)

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

(298)
(153)
(78)
(18,869)(5,361)

1,091
(59)
48
(17,928)(701)(7,560)4,850(3,871)
2,445(2,851)
2,436(5,023)
2,693(2,838)1,294(3,224)––––(1,050)

–
–

–
–

(345)
53
–
1,780

(368)
51
–
1,401

(385)
101
248
483

(237)
4
–
999

(292)
38
–
1,501

(27,117)(19,167)(10,311)(26,323)(17,846)(272)
11,216–(1,061)(2,946)13,995–1,000(1,211)
9,152
–
362

427
10,003630
1,075(3,434)
7,500
4,993
1,140

14,181(4,100)8,255(4,095)

4,537(3,519)13,233(4,100)

7,788(4,095)

2,694
(368)
(1)
(1,561)
3,695––(1,045)

3,380
(437)
(1)
(1,322)
120
1,000
(13)
–

759
(589)
1
(1,178)
112
–
–
–

2,694
(368)
–
(1,463)
3,695––(1,045)

3,380
(437)
–
(1,220)
120
1,000
(13)
–

Net cash provided by financing activities

23,37818,936

8,426

24,781

16,722

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

5,250(27,117)
23,378

4,619(19,167)
18,936

1,449(10,311)
8,426

1,745
(26,323)
24,781

5,033(17,846)
16,722

1,511
7,315
(972)

4,388
7,925
(4,998)

(436)
9,071
(710)

203
4,411
(372)

3,909
5,453
(4,951)

7,854

7,315

7,925

4,242

4,411

Note

The Company
2004
2003
$m
$m

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
Net goods and services tax (paid) received
Net decrease (increase) in trading securities
Net cash provided by operating activities

42

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)
NBNZ
Other
Premises and equipment
Purchases
Proceeds from sale
Recovery from NHB litigation
Other
Net cash (used in) investing activities
Cash flows from financing activities
Net (decrease) increase
Due to other financial institutions
Deposits and other borrowings
Due from/to controlled entities
Payables and other liabilities
Bonds and notes
Issue proceeds
Redemptions
Loan capital
Issue proceeds
Redemptions
Decrease (increase) in outside equity interests
Dividends paid
Share capital issues (ordinary capital)
ANZ StEPS preference share issue
ANZ StEPS issues costs
Preference share buyback

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
The notes appearing on pages 29 to 126 form an integral part of these financial statements

42

financial report I 29

NOTES TO THE
FINANCIAL STATEMENTS
Our critical accounting policies aredescribed on pages 129 to 133.

1: ACCOUNTING POLICIESi) Basis of preparation
This general purpose financial reportcomplies with the accounts provisions of
the Banking Act 1959, applicable
Australian Accounting Standards, theaccounts provisions of the Corporations
Act 2001, Urgent Issues Group Consensus
Views and other authoritative
pronouncements of the Australian
Accounting Standards Board. Except as
disclosed below, these accounting
policies are consistent with those of theprevious year.
Certain disclosures required by theUnited States Securities and Exchange
Commission in respect of foreign
registrants have also been includedin this report.
The financial report has been prepared inaccordance with the historical costconvention as modified by the revaluationof trading instruments which are recorded
at market value with gains and losses onrevaluation taken to the statement offinancial performance, and the deemed
cost of properties (deemed cost being thecarrying amount of revalued non current
assets as at the date of reverting to thecost basis per AASB 1041 - Revaluation of
Non Current Assets) less any accumulated
depreciation.
The preparation of the financial reportrequires the use of management
estimates. Such estimates may require
review in future periods.
The Company is a company of the kindreferred to in Australian Securities andInvestments Commission class order
98/100, dated 10 July 1998. Consequently,
amounts in the financial report have beenrounded to the nearest million dollars
except where otherwise indicated.
All amounts are expressed in Australian
dollars, unless otherwise stated.
Where necessary, amounts shown for theprevious year have been reclassified tofacilitate comparison.
ii) Changes in Accounting Policies
There have been no changes inaccounting policies for the year ended
30 September 2004.

iii) 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 statedat deemed cost in the statement offinancial position.
Where controlled entities and associates
have been sold or acquired during theyear, their operating results have been
included to the date of disposal or fromthe date of acquisition.
Control means the capacity of an entity todominate decision making, directly or
indirectly, in relation to the financial andoperating policies of another entity so as
to enable that other entity to pursue theobjectives of the controlling entity.
The Group adopts the equity method of
accounting for associates and the Group’s
interest in joint venture entities.
The Group’s share of results of associates
and joint venture entities is included in
the consolidated statement of financial
performance. Shares in associates andjoint venture entities are stated in the
consolidated statement of financial
position at cost plus the Group’s share ofpost acquisition net assets. Interests inassociates and joint ventures are reviewed
annually for impairment primarily using a
discounted cash flow methodology. In thecourse of completing this valuation othermethodologies are considered todetermine the reasonableness of thevaluation including the multiples of
earnings methodology.
All significant activities of the Group,with the exception of ING Australia Joint
Venture and PT Panin Indonesia Bank,
are operated through wholly owned
controlled entities.
The Group may invest in or establish
special purpose companies, or vehicles,
to enable it to undertake specific types oftransactions. Where the Group controls
such vehicles, they are consolidated into
the Group financial results.
iv) Goodwill
Goodwill, representing the excess of thepurchase consideration over the fair valueof the identifiable net assets of acontrolled entity at the date of gaining
control, is recognised as an asset andamortised on a straight line basis over theperiod during which the benefits are
expected to arise, not exceeding 20 years.

The unamortised balance of goodwill andnotional goodwill and the period ofamortisation are reviewed annually for
impairment using a discounted cash flow
methodology. In the course of completing
this valuation other analysis is considered
to determine the reasonableness of thevaluation including the multiples of
earnings methodology. Where the balanceexceeds the value of expected future
benefits, the difference is charged to thestatement of financial performance.
v) Foreign currency
Financial assets and liabilities
denominated in foreign currencies aretranslated into Australian dollars at therates of exchange ruling at balance date.
Revenues and expenses of overseas
branches and controlled entities aretranslated at average exchange rates
for the year.
Net translation differences arising fromthe translation of overseas branches andcontrolled entities considered to be selfsustaining operations are included in theforeign currency translation reserve, after
allowing for those positions hedged byforeign exchange contracts and related
currency borrowings (net of tax).
vi) Fee income
Fee and commission income are broughtto account on an accruals basis.
Yield-related front-end application fees
received are deferred and accrued toincome as an adjustment to yield over theperiod of the loan. Non yield-related
application and activation lending fees
received are recognised as income nolater than when the loan is disbursed or
the commitment to lend expires.

30 I financial report

NOTES TO THE
FINANCIAL STATEMENTS
1: ACCOUNTING POLICIES(CONTINUED)
Fees and commissions that relate to the
execution of a significant act (for example,
advisory services, placement fees andunderwriting fees) are taken to income
when the fees are receivable.
Fees charged for providing ongoing
services that represent the recoupmentof the costs of providing service (forexample, maintaining and administering
existing facilities) are recognised asrevenue in the period in which theservice is provided.
vii) Net loans and advances
Net loans and advances include direct
finance provided to customers such asbank overdrafts, credit cards, term loans,lease finance, hire purchase finance andcommercial bills.
Overdrafts, credit cards and term loans
are carried at principal balances
outstanding. Interest on amounts
outstanding is accounted for on an
accruals basis.
Finance leases, including hire purchase
contracts are accounted for using thefinance method whereby income is taken
to account progressively over the life of
the lease or the contract in proportion tothe outstanding investment balance.
The finance receivable component ofoperating leases is accounted for using
the finance method and residual interest
retained are recorded as other assets.
At finalisation, goods are disposed of andproceeds received are applied against theresidual value. Any resulting gains orlosses are recognised through income.
A hire purchase is a contract where
Esanda or UDC (the 'owner') allows thecustomer (the 'hirer') the right to possessand use goods in return for regular
payments. When all payments are
made the title to the goods will passto the customer.
The gross amount of contractual payments
for finance leases to business customers
that have a fixed rate and a fixed term arerecorded as gross lease receivables andthe unearned interest component isrecognised as income yet to mature.
Customer financing through redeemablepreference shares is included within net
loans and advances. Dividends received
on redeemable preference shares aretaken to the statement of financial
performance as part of interest income.

All loans are subject to regular scrutiny
and graded according to the level of credit
risk. Loans are classified as either
productive or non-accrual. The Group has
adopted the Australian Prudential
Regulation Authority Impaired Assets
Guidelines in assessing non-accrualloans. Non-accrual loans include loans
where the accrual of interest and fees hasceased due to doubt as to full recovery,and loans that have been restructured
with an effective yield below the Group’s
average cost of funds at the date ofrestructuring. A specific provision israised to cover the expected loss, wherefull recovery of principal is doubtful.
Restructured loans are loans with aneffective yield above the Group’s cost offunds and below the yield applicable to acustomer of equal credit standing.
Cash receipts on non-accrual loans are, in
the absence of a contrary agreement withthe customer, applied as income or fees inpriority to being applied as a reduction inprincipal, except where the cash receipt
relates to proceeds from the sale of security.
viii) Bad and doubtful debts andother loss contingencies
Bad and doubtful debts:
Each month the Group recognises an
expense for credit losses based on the
expected long term loss ratio for each partof the loan portfolio. The monthly charge
is booked 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 byconsidering:> the history of credit loss for eachtype and risk grade of lending; and> the size, composition and risk
profile of the current loan portfolio.
The Group regularly reviews theassumptions used in the ELP models.
These reviews are conducted inrecognition of the subjective nature of ELP
methodology. Methodologies are updated
as improved analysis becomes available.
In addition, the robustness of outcomes isreviewed 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 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 periodicallyincreased or decreased.
Specific provisions are maintained tocover identified doubtful debts. All known
bad debts are written off in the year inwhich they are identified. The specificprovision requirement (representing new
and increased specific provisions lessspecific provision releases) is transferredfrom the general provision to the specificprovision. Recoveries, representing excesstransfers to the specific provision, arecredited to the general provision.
Provisions for doubtful debts are
deducted from loans and advances inthe statement of financial position.
Other loss contingencies:
These items are recorded as liabilities on
the balance sheet when the following
requirements are met:
- the transaction is probable in thatthe contingency is likely to occur; and- can be reasonably estimated.
Further disclosure is made within note 48,
where the above requirements are not met
but the contingency falls within the
category of "reasonably possible".
Specific details are provided together withan estimate of the range or a statementthat such as estimate is not possible.

financial report I 31

NOTES TO THE
FINANCIAL STATEMENTS
1: ACCOUNTING POLICIES(CONTINUED)ix) Acceptances
Commercial bills accepted but not heldin portfolio are accounted for anddisclosed as a liability with acorresponding contra asset.
The Group’s own acceptances discounted
are held as part of either the trading
securities portfolio or the loan portfolio,
depending on whether, at the time of suchdiscount, the intention was to hold theacceptances for resale or until maturity.
x) Trading securities
Securities held for trading purposes arerecorded at market value. Unrealised
gains and losses on revaluation are taken
to the statement of financial performance.
Except for contracts subject to masternetting agreements that create a legal
right of set off for which only the net
revaluation amount is recognised on thestatement of financial performance,
unrealised gains on trading securities arerecognised as part of other assets andunrealised losses are recognised as partof other liabilities in a category described
as "treasury instrument revaluations”.
Market value for listed and unlisted
securities is determined by the pricedisplayed by a willing buyer in a liquidmarket at the reporting date, adjusted for
liquidity issues around the size of theparcel of securities held by the Group ascompared to the normal daily trading
volumes in the securities. Where a market
price in a liquid market is not readily
available, the market value is determinedby reference to the market price available
for a security with similar credit, maturity
and yield characteristics or by using
industry standard pricing models.
xi) Investment securities
Investment securities are those which theGroup intends and has the ability to holduntil maturity. Such securities arerecorded at cost or at cost adjusted foramortisation of premiums or discounts.
Premiums and discounts are capitalised
and amortised from the date of purchaseto maturity. Interest and dividend income
is accrued. Changes in market values of
securities are not taken into accountunless there is considered to be an otherthan temporary diminution in value.
The market value of listed and unlisted
investment securities used for consideringother than temporary impairment and fairmarket value disclosures is determinedusing quoted market prices for securities
with the same or similar credit, maturity
and yield characteristics.
Market value, used for impairment issues,
is determined in accordance with themethodology discussed under
Trading Securities.
xii) Repurchase agreements
Securities sold under repurchaseagreements are retained in the financial
statements and a counterparty liability isdisclosed under the classifications of Due
to other financial institutions or Deposits
and other borrowings. The difference
between the sale price and the repurchaseprice is amortised over the life of the
repurchase agreement and charged tointerest expense in the statement offinancial performance.
Securities purchased under agreements toresell are recorded as Liquid assets, Netloans and advances, or Due from otherfinancial institutions, depending on theterm of the agreement and thecounterparty.
xiii) Derivative financial instruments
Derivative financial instruments(derivatives) are contracts whose value isderived from one or more underlying
financial instruments or indices. They
include swaps, forward rate agreements,
futures, options and combinations ofthese instruments.
Trading derivatives, comprising derivatives
entered into for customer-related or
proprietary reasons or for hedging the
trading portfolio, are measured at fairvalue and all gains and losses are taken
to other operating income in thestatement of financial performance.
Fair value losses arising from trading
derivatives are not offset against fair value
gains on the statement of financial position
unless a legal right of set-off exists.
Derivatives designated as hedges ofunderlying non-trading exposures areaccounted for on the same basis as theunderlying exposures. To be designatedas a hedge, the fair value of the hedge
must move inversely with changes in thefair value of the underlying exposure.
Gains and losses resulting from thetermination of a derivative that was
designated as a hedge of non-trading
exposures are deferred and amortisedover the remaining period of the originalterm covered by the terminatedinstrument where the underlying exposure
still exists. The gains or losses arerecorded in the income or expense line
in which the underlying exposure
movements are recorded. Where theunderlying exposure no longer exists,
the gains and losses are recognised in thestatement of financial performance in theother operating income line.
Gains and losses on derivatives related
to hedging exposures arising fromanticipated transactions are deferred andrecognised in the financial statements
when the anticipated transaction occurs.
These gains and losses are deferred only
to the extent that there is an offsetting
unrecognised (unrealised) gain or loss on
the exposures being hedged. Deferredgains and losses are amortised over the
expected term of the hedged exposureand are recorded in the results ofoperations in the same line as theunderlying exposure. The deferred gainor loss is recorded in other liability orother assets in the statement offinancial position.
Gains and losses that arise prior to andupon the maturity of transactions enteredinto under hedge rollover strategies aredeferred and included in themeasurement of the hedged anticipatedtransaction if the transaction is still
expected to occur. If the forecasted
transaction is no longer expected to occur,
the gains and losses are recognised
immediately in the statement of financial
performance in the other income disclosure.

32 I financial report

NOTES TO THE
FINANCIAL STATEMENTS
1: ACCOUNTING POLICIES(CONTINUED)
Movements in the derivative financial
position are recorded in the cashflow
statement when they are settled on theother financing and investing lines.
xiv) Premises and equipment
Premises and equipment are carried atcost less depreciation or amortisation.
Profit or loss on the disposal of premises
and equipment is determined as thedifference between the carrying amountof the assets at the time of disposal andthe proceeds of disposal, and is includedin the results of the Group in the yearof disposal.
Assets other than freehold land are
depreciated at 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
Building integrals
Furniture & equipment
Computer &office equipment
Software

1%
10%
10%
12.5% to 33%
14% to 33%

Leasehold improvements are amortised
on a straight line basis over the shorterof the useful lives or remaining terms of
the lease.
Costs incurred in acquiring and building
software and computer systems arecapitalised as fixed assets and expensed
as amortisation 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 notcapitalised.
The carrying value of all non current
assets, including premises andequipment, have been assessed annually,and have not been found to be in excessof their recoverable amounts.
Recoverable amounts are determinedthrough a combination of comparisonswith market values and cash flows. If thecarrying value of non current assets
exceeds its recoverable amount, the asset
is written down to the lower value. Where
assets working together as a groupsupport the generation of cash flows, therecoverable amount is assessed inrelation to the group of assets.

xv) Income tax
The Group adopts the liability method of
tax effect accounting whereby income tax
expense is calculated based on
accounting profit adjusted for permanentdifferences. Permanent differences are
items of revenue and expense which arerecognised in 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 are carried forward at tax
rates applicable to future periods.
These future tax benefits are not broughtto account unless realisation of the asset
is assured beyond reasonable doubt.
Future tax benefits relating to tax losses
are only carried forward where realisationof the benefit is considered virtually certain.
Provision for Australian income tax ismade where the earnings of overseas
controlled entities are subjected toAustralian tax under the attribution rules
for the taxation of foreign sourced income.
Otherwise, no provision is made foroverseas withholding tax or Australian
income tax which may arise on
repatriation of earnings from overseas
controlled entities, where it is expected
these earnings will be retained by thoseentities to finance their ongoing business.
For details of the impact of Tax
Consolidation, refer notes 6, 19 and 25.
xvi) Employee entitlements
The amounts expected to be paid inrespect of employees’ entitlements toannual leave are accrued at expectedsalary rates including on-costs. Liability
for long service leave is accrued in respectof all applicable employees at the present
value of future amounts expected
to be paid.
xvii) Provisions
Refer to note 27 for the accounting
policies covering various provisions
excluding ELP which is detailed in note
1(viii) above.
xviii) Superannuation commitments
Contributions, which are determined onan actuarial basis, to superannuation
schemes are charged to personnel
expenses in the statement offinancial performance.
Any aggregate deficiencies arising fromthe actuarial valuations of the Group’s
defined benefit schemes have been
provided for in the financial statements,
where a legal or constructive
obligation exists.

The assets and liabilities of the schemes
have not been consolidated as theCompany does not have direct or indirectcontrol of the schemes.
xix) Leasing
Leases entered into by the Group as
lessee are predominantly operatingleases, and the operating lease payments
are included in the statement of financial
performance in equal installments overthe lease term.
xx) Goods and services tax
Revenues, expenses and assets arerecognised net of the amount of goods
and services tax (GST), except where theamount of GST incurred is not recoverablefrom the Australian Tax Office (ATO). In
these circumstances the GST is recognisedas part of the cost of acquisition of theasset or as part of the expense.
Receivables and payables are stated withthe amount of GST included. The net
amount of GST recoverable from, orpayable to, the ATO is included as another asset or liability in the statementof financial position.
Cash flows are included in the statementof cash flows on a gross basis. The GST
components of cash flows arising frominvesting and financing activities which
are recoverable from, or payable to, theATO are classified as operating cash flows.

financial report I 33

NOTES TO THE
FINANCIAL STATEMENTS
1: ACCOUNTING POLICIES(CONTINUED)
xxi) Life insurance
The Group’s life insurance business was
conducted through ANZ Life Assurance
Company Limited until 30 April 2002 andits results consolidated until that date.
On 1 May 2002 the Group’s life insurance
business was transferred to a joint venture
entity, (see note 45) which is accounted
for in accordance with the equity methodof accounting. The joint venture adopts
similar accounting policies to thosedescribed here.
Components of life insurance margin onservices operating income disclosed arepremium revenue and related revenue,
investment revenue, claims expense andinsurance policy liabilities expense(refer note 40).
Premiums with a regular due date arerecognised as revenue on an accruals
basis. Unpaid premiums are only
recognised as revenue during the days ofgrace or where secured by the surrender
value of the policy and are included as'Other Assets' in the Statement of
Financial Position. Premiums with no due
date are recognised as revenue on a cash
received basis. This category relates tocontracts which offer policy holders thefacility to make additional payments butwhere there is no contractual requirement
to do so.
Business is classified as investmentlinked where the benefit amount isdirectly linked to the market value of theinvestments. The policy owner bears therisk and rewards of the fund's investment
performance. Non investment linked
business covers a wide range of contracts
where the benefit amount is not directly
linked to the market value of theinvestments. Dependent upon the type ofcontract involved, benefits could be paid
upon termination of the contract from any
cause or specifically on death, or on theoccurrence of a contingency dependent on
the termination or continuation of humanlife or on the occurrence of injury or
disability caused by accident or illness.
The financial risk of the occurrence of theevent which crystallises the payment of
the benefit is borne by the company.

Claims under investment-linked business
are recognised when the policy ceases toparticipate in the earnings of the fund.
Claims on non investment-linked business
are recognised when the liability to thepolicy owner under the policy contract
has been established or upon notificationof the insured event depending on thetype of claim.
Policy liabilities and other liabilities aremeasured at net present value of
estimated future cash flows. Changes in
net present values are recognised in thestatement of financial performance asrevenue or expenses in the financial year
in which they occur.
All assets are measured at net market
values as at the reporting date. Changes
in the net market values are recognised in
the statement of financial performance asrevenue or expenses in the financial year
in which they occur.
xxii) Capitalised expenses
Direct external expenses related to theacquisition of interest earning assets,
including structured institutional lending,mortgages and finance leases, are initiallyrecognised as part of the cost of acquiring
the asset and written-off as an adjustment
to its expected yield over its expected life.
For assets subject to prepayment,
expected life is determined on the basisof the historical behaviour of theparticular asset portfolio, taking into
account contractual obligations andprepayment experience assessed on aregular basis. Impairment of capitalised
expenses is assessed through comparing
the actual behaviour of the portfolio
against initial expected life assumptions.

34 I financial report

NOTES TO THE FINANCIAL STATEMENTS
2: INCOME
2004$mConsolidated
2003
$m

2002
$m

The Company
2004
2003
$m
$m

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

209
–
359
275
12,984
290

92
–
272
180
9,380
291

121
1
261
136
8,245
273

68
–
245
210
8,194
200

65
–
230
125
6,667
213

From controlled entities

14,117–

10,215
–

9,037
–

8,917
137

7,300
78

Total interest income

14,117

10,215

9,037

9,054

7,378

i) Fee income
Lending
Other, commissions1

1,002
1,419

933
1,115

876
1,196

822
947

813
795

From controlled entities

2,421
–

2,048
–

2,072
–

1,769
260

1,608
219

Total fee income

2,421

2,048

2,072

2,029

1,827

ii) Other income
Foreign exchange earnings
Profit on trading instruments
Significant item: Net profit before tax from sale of business to INGA joint venture
Significant item: Net profit before tax from the close out of the TrUEPrS swap
Hedge of TrUEPrS cash flows2
Life insurance margin on services operating income (refer note 40)
Profit (loss) on sale of premises3
Rental income
Other

411
151
14
108
2
15
(7)
2
129

348
110
–
–
71
–
6
3
116

365
59
174
–
72
99
5
4
89

232
158
14
108
2
–
–
2
482

238
122
–
–
71
–
–
3
1,729

Total other income4

825

654

867

998

2,163

3,246

2,702

2,939

3,027

3,990

Share of joint venture profit from ING Australia (refer note 45)
Share of associates profit (net of writeoffs)

97
48

55
51

2
29

–
–

–
–

Total share of joint venture and associates profit

145

106

31

–

–

17,50813,023

12,007

12,081

11,368Other operating income

Total other operating income
5

Total income6
1
2
3
4
5
6

Includes commissions from funds management business (up to 30 April 2002)
Preference shares are issued via the TrUEPrS structure. This income is earned on a fixed receive/floating pay swap of the fixed dividend commitments. $2 million in 2004 treated as significant item
Gross proceeds on sale of premises is $34 million (2003: $33 million, 2002: $42 million)
The Company’s ‘other income’ include dividends received from controlled entities of $648 million (2003: $1,803 million)
Net of notional goodwill amortisation
Includes external dividend income of $3 million (2003: $10 million, 2002: $3 million) for the Group and $2 million (2003: $1 million) for the Company

financial report I 35

NOTES TO THE FINANCIAL STATEMENTS
3: EXPENSES
2004$mConsolidated
2003
$m

2002
$m

To other financial institutions
On deposits
On borrowing corporations’ debt
On commercial paper
On loan capital, bonds and notes
Other

238
5,037
481
765
1,699
643

183
3,502
445
310
1,052
412

246
3,019
404
251
801
298

161
3,403
–
196
1,515
534

164
2,722
–
184
1,014
295

To controlled entities

8,863
–

5,904
–

5,019
–

5,809
279

4,379
177

Total interest expense

8,863

5,904

5,019

6,088

4,556

i) Personnel
Pension fundEmployee entitlements and taxes
Salaries and wages
Other

145
144
1,431
411

109
122
1,177
342

103
129
1,134
348

108
108
975
303

94
106
912
283

Total personnel expenses

2,131

1,750

1,714

1,494

1,395

ii) Premises
Amortisation of leasehold improvements
Depreciation of buildings and integrals
Rent
Utilities and other outgoings
Other

13
12
197
109
22

15
16
154
88
22

14
17
161
92
15

7
2
139
81
17

9
1
120
74
18

To controlled entities

353
–

295
–

299
–

246
46

222
43

Total premises expenses

353

295

299

292

265

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

25
83
240
59
101
45

18
61
183
70
103
30

34
62
140
59
105
24

23
48
176
62
90
19

16
41
148
63
90
12

Total computer expenses

553

465

424

418

370

iv) OtherAdvertising and public relations
Amortisation of goodwill1
Audit fees (refer note 5)
Depreciation of furniture and equipment2
Freight and cartage
Loss on sale of equipment
Non-lending losses, frauds and forgeries
Postage and stationery
Professional fees
Telephone
Travel
Other

130
146
5
44
41
6
49
111
112
57
100
128

91
18
4
33
35
7
48
92
101
49
78
102

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

72
8
3
27
32
5
30
66
83
30
65
189

66
9
2
26
29
2
36
67
86
35
55
165

Total other expenses

929

658

653

610

578

v) Restructuring

60

60

63

64

55

4,026

3,228

3,153

2,878

2,663

–

–

(248)

–

–

Total operating expenses including recovery from NHB litigation

4,026

3,228

2,905

2,878

2,663

Total expenses

12,889

9,132

7,924

8,966

7,219

The Company
2004
2003
$m
$m

Interest expense

Operating expenses

Total operating expenses
Significant item: recovery from NHB litigation

1 In addition, there is a notional goodwill amortisation charge of $41 million (2003: $44 million; 2002: $18 million) included in the calculation of the share of income from the ING Australia joint venture
2 Excludes integrals $8 million (2003: $12 million), included in Premises disclosure36 I financial report

NOTES TO THE FINANCIAL STATEMENTS
4: EQUITY INSTRUMENTS ISSUED TO EMPLOYEESUnder existing Australian Accounting Standards, equity instruments issued to employees are not required to be expensed. The impact ofexpensing options1, and shares issued under the $1,000 employee share plan, has been calculated and is disclosed below.
2004$mConsolidated
2003
$m

2002
$m

Net profit attributable to shareholders of the Company
Expenses attributable to:
Options issued to Group Heads1
Options issued to general management1
Shares issued under $1,000 employee share plan

2,815

2,348

2,322

(8)
(23)
(22)

(8)
(24)
(18)

(7)
(19)
(18)

Total

2,762

2,298

2,278

1 Based on fair values estimated at grant date determined in accordance with the fair value measurement provisions of AASB 1046. Value of options are amortised on a straight-line basis over thevesting period.

5: REMUNERATION OF AUDITORS
2004
$’000

Consolidated
2003
$’000

2002
$’000

2,981
567
2,934

2,640
2,083
3,891

2,065
2,793
8,188

2,357
492
2,899

2,115
1,690
3,864

6,482

8,614

13,046

5,748

7,669

563

775

1,278

443

775

563

775

1,278

443

775

7,045

9,389

14,324

6,191

8,444

1,834
1,494
77

1,293
1,503
1,473

1,305
1,611
316

346
556
32

315
639
1,194

3,405

4,269

3,232

934

2,148

65

83

200

31

10

65

83

200

31

10

Total

3,470

4,352

3,432

965

2,158

Total remuneration of auditors

10,515

13,741

17,756

7,156

10,602The Company
2004
2003
$’000
$’000

KPMG Australia
Audit or review of financial reports of the Company or any entity in the Group
Other audit-related services1,2
Other assurance services3

Taxation

Total
Overseas Related practices of KPMG Australia
Audit or review of financial reports of Group entities
Other audit-related services1,2
Other assurance services3

Taxation

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 certain 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 was i) less than
$5,000; or ii) was for a mortgage loan on principal place of residence; or iii) arose prior to the date of Class Order, or prior to joining KPMG, and 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 of the statutory audit, are consistent with the roleof 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 bymanagement, and engagements where the auditor may ultimately be required to express an opinion on its own work. However, non-audit services that are not perceived to be materially in conflict withthe role of auditor may be provided by KPMG Australia or any of its related practices subject to the approval of the ANZ Audit Committee.
KPMG has confirmed to ANZ that it has policies in place on loans from audit clients that are in accordance with Rule 2-01 of Regulation S-X and that neither KPMG nor any covered person or immediatefamily member have any loans outstanding from Australia and New Zealand Banking Group Limited and its related parties that are part of the audit client that are not in compliance with that rule.
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 2004 includes an NBNZ due diligence oversight review and markets co-sourcing internal audit work which ceased in April 2004. 2003 includes assessing the Group’s compliance with therequirements of the US Patriot Act. 2002 includes due diligence services principally related to ING Australia joint venture. Under the policy adopted by ANZ in April 2002, due diligence services are nolonger provided by the external auditor, unless specifically approved by the Boardfinancial report I 37

NOTES TO THE FINANCIAL STATEMENTS
6: INCOME TAX EXPENSE
2004$m

Consolidated
2003
$m

2002
$m

3,987

3,277

3,223

2,681

3,684

1,196

983

967

804

1,105

20
(32)
(20)
(4)
46
(43)
–
(4)
11

15
(31)
(16)
–
5
(32)
–
–
5

14
(39)
(11)
7
4
(9)
15
(48)
(4)

2
(1)
(194)
–
1
(1)
–
(4)
105

2
–
(541)
–
1
–
–
–
52

Income tax under/(over) provided in prior years

1,170
(2)

929
(3)

896
2

712
(2)

619
(3)

Total income tax expense

1,168

926

898

710

616

802
366

672
254

683
215

641
69

543
73

1,168

926

898

710

616

Reconciliation of the prima facie income tax payable on profit with the income
tax expense charged in the statement of financial performance
Profit before income tax
Prima facie income tax at 30%
Tax effect of permanent differences
Overseas tax rate differential
Other non-assessable income
Rebateable and non-assessable dividends
Life insurance accounting
Goodwill amortisation
Profit from associated and joint venture entities
NHB settlement tax rate differential
Sale of business to INGA joint venture
Other

Australia
Overseas

The Company
2004
2003
$m
$m

Tax Consolidation
The Company, Australia and New Zealand Banking Group Limited, is the head entity in the tax-consolidated group, comprising all theAustralian wholly-owned subsidiaries, trusts and partnerships. The implementation date for the tax-consolidated group is 1 October 2003.
Under tax consolidations the head entity recognises all of the current and deferred tax assets and liabilities of the tax-consolidated groupadjusted for the impact of arrangements made with other members of the tax - consolidated group.
Members of the tax-consolidated group have entered into a tax sharing agreement which provides for the allocation of income tax liabilities
between the entities should the head entity default on its income tax payment obligations.
The tax-consolidated group has also entered into a tax funding agreement that requires wholly-owned subsidiaries to make/receive
contributions to the head entity for:- deferred tax balances recognised by the head entity on implementation date, including the impact of any relevant reset tax cost bases; and- current tax assets and liabilities and deferred tax balances which have been calculated as if the wholly-owned subsidiaries were taxed
on a "stand-alone" basis.
The contributions are payable as set out in the tax funding agreement and reflect the timing of the head entity's obligations to makepayments for tax liabilities to the relevant tax authorities. The assets and liabilities arising under the tax funding agreement are recognised
as intercompany assets and liabilities which are equivalent to deferred tax balances.
Calculations at 30 September 2004 have been based on legislation enacted to that date. These calculations have resulted in no material
adjustment to the consolidated tax expense or consolidated deferred tax balances for the year ended 30 September 2004.

38 I financial report

NOTES TO THE FINANCIAL STATEMENTS
7: DIVIDENDS
2004$mConsolidated
2003
$m

2002
$m

The Company
2004
2003
$m
$m

Interim dividend
Proposed final dividend
Bonus option plan adjustment

850
7771
(29)

666
–1
(25)

583
692
(23)

850
7771
(29)

666
–1
(25)

Dividends on ordinary shares

1,598

641

1,252

1,598

641

Ordinary dividends

1 Change in accounting standard in 2003. Dividends no longer accrued and are recorded when declared. Final dividend of $983 million not included in above table

A final dividend of 54 cents, fully franked, is proposed to be paid on each fully paid ordinary share on 17 December 2004 (2003 final
dividend of 51 cents, paid 19 December 2003, fully franked, 2002: final dividend of 46 cents, paid 13 December 2002, fully franked).
The 2004 interim dividend of 47 cents, paid 1 July 2004, was fully franked (2003: interim dividend of 44 cents, paid 1 July 2003,
was fully franked, 2002: interim dividend of 39 cents, paid 1 July 2002, 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%(2003: 30%, 2002: 30%).
2004$mConsolidated
2003
$m

2002
$m

The Company
2004
2003
$m
$m

Trust Securities Issues
ANZ Stapled Exchangeable Preferred Securities (ANZ StEPS)

36
62

102
–

117
n/a

–
–

–
–

Dividends on preference shares

98

102

117

–

–

Preference dividends

Trust Securities Issues (ANZ TrUEPrS)In 1998 ANZ TrUEPrS issued 124,032,000 preference shares, raising USD 775 million via Trust Securities issues. The Trust Securities carried
an entitlement to a distribution of 8% (USD 400 million) or 8.08% (USD 375 million). The amounts were payable quarterly in arrears.
Payment dates were the fifteenth day of January, April, July and October in each year. The preference shares were bought back on
12 December 2003.
ANZ Stapled Exchangeable Preferred Securities (ANZ StEPS)
On 23 September 2003, the Group issued 10 million ANZ StEPS at $100 each raising $1 billion ($987 million net of issue costs of$13 million). ANZ StEPS comprise 2 fully paid securities - an interest paying unsecured note stapled to a fully paid preference share.
Distributions on ANZ StEPS are non-cumulative and are payable quarterly in arrears (on 15 March, 15 June, 15 September, 15 December of
each year) based upon a floating distribution rate equal to the 90 day bank bill rate plus a margin. At each payment date the 90 day bankbill rate is reset for the next quarter. Dividends are not payable on the preference share while it is stapled to the note. If distributions are
not paid on ANZ StEPS, the Company may not pay dividends or return capital on its ordinary shares or any other share capital ranking below
the preference share component.
Dividend Franking Account
The amount of franking credits available to the Company for the subsequent financial year is $111 million (2003 and 2002: nil), after
adjusting for franking credits that will arise from the payment of tax on Australian profits for the 2004 financial year, $421 million of franking
credits which will be utilised in franking the proposed final dividend and franking credits that may not be accessible by the Company at present.
The 2004 amount includes franking credits that were transferred from Australian wholly-owned entities to the parent entity at
1 October 2003 when these entities entered the Australian tax consolidated group.

financial report I 39

NOTES TO THE FINANCIAL STATEMENTS
7: DIVIDENDS (CONTINUED)
Restrictions which Limit the Payment of Dividends
There are presently no significant restrictions on the payment of dividends from controlled entities to the Company. Various capital
adequacy, liquidity, statutory reserve and other prudential requirements must be observed by certain controlled entities and the impact
on these requirements caused by the payment of cash dividends is monitored.
Payments of dividends from overseas controlled entities may attract withholding taxes which have not been provided for in thesefinancial statements.
There are presently no restrictions on payment of dividends by the Company. Reductions of shareholders’ equity through payment ofcash dividends is monitored having regard to the regulatory requirements to maintain a specified capital adequacy ratio. In particular,
the Australian Prudential Regulation Authority has advised Australian banks that 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, 3,909,659 ordinary shares were issued at $16.61 per share, and 3,906,171 ordinary shares at $17.84 per share, under the
Dividend Reinvestment Plan (2003: 3,142,629 ordinary shares at $18.32 per share, and 3,081,237 ordinary shares at $18.48 per share)
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 orpart of their right to dividends in return for the receipt of bonus shares.
During the year, 927,439 ordinary shares were issued at $16.61 per share, and 844,425 ordinary shares at $17.84 per share, under the
Bonus Option Plan (2003: 787,335 ordinary shares at $18.32 per share, and 747,652 ordinary shares at $18.48 per share).
Declared Bonus options
dividend
exercised$m$mFinal dividend 2003
Interim dividend 2004

Amount
paid
$m

777
850

(15)
(14)

762
836

1,627

(29)

1,598

40 I financial report

NOTES TO THE FINANCIAL STATEMENTS
8: EARNINGS PER ORDINARY SHARE

Basic earnings per share (cents)1

2004
$m

Consolidated
2003
$m

2002
$m

153.1

142.4

141.4

2,819
4
98
2,717

2,351
3
102
2,246

2,325
3
117
2,205

1,774.1

1,577.8

1,559.8

149.7

141.7

140.4

2,819
4
98
44
2,761

2,351
3
102
–
2,246

2,325
3
117
–
2,205

1,774.1
70.7
1,844.8

1,577.8
7.2
1,585.0

1,559.8
10.2
1,570.0

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
Weighted average number of ordinary shares (millions)1
Used in calculating basic earnings per share
1

Diluted earnings per share (cents)
Earnings reconciliation

Net profit
Less: net profit attributable to outside equity interests
Less: preference share dividend paid
Add: Hybrid interest expense
Earnings used in calculating diluted earnings per share
Weighted average number of ordinary shares (millions)1
Used in calculating basic earnings per share
Add: potential conversion of options to ordinary shares1
Used in calculating diluted earnings per share
1 Discounted for rights issue

The weighted average number of converted and lapsed options, weighted with reference to the date of conversion or lapse,
and included in the calculation of diluted earnings per share is 1.0 million.
StEPS has not been included in the calculation of diluted EPS as they are not dilutive. Refer to note 30.

financial report I 41

NOTES TO THE FINANCIAL STATEMENTS
9: LIQUID ASSETS
Consolidated
2004
2003
$m
$m

The Company
2004
2003
$m
$m

696
157
568

601
753
496

678
121
552

522
747
496

1,421

1,850

1,351

1,765

418
2,289
2,080
155

284
1,647
2,437
374

103
1,087
1,203
–

96
882
1,173
–

4,942

4,742

2,393

2,151

6,363

6,592

3,744

3,916

Less than 90 days
More than 90 days

4,999
1,364

5,509
1,083

2,408
1,336

2,834
1,082

Total liquid assets

6,363

6,592

3,744

3,916

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

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

Total liquid assets
Maturity analysis based on original term to maturity at 30 September

10: DUE FROM OTHER FINANCIAL INSTITUTIONS
Consolidated
2004
2003
$m
$m

The Company
2004
2003
$m
$m

Australia
Overseas

498
4,283

646
1,781

488
2,049

638
1,505

Total due from other financial institutions

4,781

2,427

2,537

2,143

370
2,692
824
790
105

638
1,283
351
84
71

299
1,729
349
58
102

636
1,051
309
83
64

4,781

2,427

2,537

2,143

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

42 I financial report

NOTES TO THE FINANCIAL STATEMENTS
11: TRADING SECURITIES
Trading securities are allocated between Australia and Overseas based on the domicile of the issuer
Consolidated
2004
2003
$m
$m

The Company
2004
2003
$m
$m

Unlisted – Australia
Commonwealth securities
Local, semi-government and other government securities
ANZ accepted bills
Other securities and equity securities

164
1,693
1,875
627

475
1,230
820
1,142

164
1,693
1,875
568

475
1,230
820
1,109

4,359

3,667

4,300

3,634

631
488

395
151

241
242

2
–

1,119

546

483

2

Total unlisted

5,478

4,213

4,783

3,636

Total trading securities

5,478

4,213

4,783

3,636

Unlisted – Overseas
Other government securities
Other securities and equity securitiesfinancial report I 43

NOTES TO THE FINANCIAL STATEMENTS
12: INVESTMENT SECURITIESConsolidated
2004
2003
$m
$m

The Company
2004
2003
$m
$m

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

4

4

–

–

4

4

–

–

1,070
1,354

546
1,540

1,070
1,354

546
1,540

2,424

2,086

2,424

2,086

2,428

2,090

2,424

2,086

895
2,786

1,362
250

895
2,660

1,362
157

3,681

1,612

3,555

1,519

914
357
366

399
237
429

–
133
5

–
131
102

1,637

1,065

138

233

Total unlisted

5,318

2,677

3,693

1,752

Total investment securities

7,746

4,767

6,117

3,838

12

2

–

–

12

2

–

–

1,072
1,358

548
1,537

1,072
1,358

548
1,537

2,430

2,085

2,430

2,085

2,442

2,087

2,430

2,085

895
2,785

1,362
251

895
2,659

1,362
157

3,680

1,613

3,554

1,519

913
361
366

399
238
429

–
137
5

–
132
102

1,640

1,066

142

234

Total market value of unlisted investment securities

5,320

2,679

3,696

1,753

Total market value of investment securities

7,762

4,766

6,126

3,838

Listed – Overseas
Other government securities
Other securities and equity investments

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

Unlisted – Overseas
New Zealand 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

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

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

44 I financial report

NOTES TO THE FINANCIAL STATEMENTS
12: INVESTMENT SECURITIES (CONTINUED)
Investment Securities by Maturities and Yields
Based on remaining term to maturity at 30 September 2004
Less than
3 months$m

Between 3
months and
12 months$m

Between
1 year and5 years$m

Between
5 years and
10 years$m

After
10 years$mNomaturity
specified
$m

Total
$m

Market
Value
$m

695
2,480

200
50

–
51

–
162

–
–

–
47

895
2,790

895
2,797

3,175

250

51

162

–

47

3,685

3,692

589
861
194

325
491
442

–
75
1,077

–
–
1

–
–
6

–
–
–

914
1,427
1,720

913
1,433
1,724

1,644

1,258

1,152

1

6

–

4,061

4,070

Total book value

4,819

1,508

1,203

163

6

47

7,746

n/a

Total market value

4,784

1,508

1,251

165

6

48

n/a

7,762

Less than
1 year%

Between
1 year and5 years%

Between
5 years and
10 years%

After
10 years%

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

5.37
5.33

–
6.49

–
6.56

–
–

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

6.08
4.37
3.00

–
7.89
2.71

–
–
2.84

–
–
2.18

At book value

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

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

Weighted average yields1

Australia

1 Based on effective yields for fixed interest and discounted securities and dividend yield for equity investments at 30 September 2004

financial report I 45

NOTES TO THE FINANCIAL STATEMENTS
12: INVESTMENT SECURITIES (CONTINUED)
Investment Securities by Maturities and Yields
Based on remaining term to maturity at 30 September 2003
Less than
3 months$m

Between 3
months and
12 months$m

Between
1 year and5 years$m

Between
5 years and
10 years$m

After
10 years$mNomaturity
specified
$m

Total
$m

Market
Value
$m

1,002
95

360
60

–
68

–
–

–
–

–
31

1,362
254

1,362
253

1,097

420

68

–

–

31

1,616

1,615

291
220
831

108
363
503

–
200
635

–
–
–

–
–
–

–
–
–

399
783
1,969

399
786
1,966

1,342

974

835

–

–

–

3,151

3,151

Total book value

2,439

1,394

903

–

–

31

4,767

n/a

Total market value

2,439

1,393

903

–

–

31

n/a

4,766

Less than
1 year%

Between
1 year and5 years%

Between
5 years and
10 years%

After
10 years%

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

4.70
4.94

–
4.95

–
–

–
–

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

4.99
7.74
3.11

–
6.25
1.92

–
–
–

–
–
–

At book value

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

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

Weighted average yields1

Australia

1 Based on effective yields for fixed interest and discounted securities and dividend yield for equity investments at 30 September 2003

46 I financial report

NOTES TO THE FINANCIAL STATEMENTS
13: 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
2004
2003
$m
$m

The Company
2004
2003
$m
$m

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

4,390
4,523
71,49949,217
2,667
7,093
1,091

3,915
4,265
62,482
41,133
2,613
6,127
785

4,390
4,523
71,49944,098
1,061
497
1,066

3,915
4,265
62,48235,804
1,020
398
760

140,480

121,320

127,134

108,644

1,604
1,032
31,51922,472
493
517
584

611
491
10,551
7,425
370
496
985

–
–
–
–
–
–
–

–
–
–
–
–
–
–

58,221

20,929

–

–

558
128
464
8,730
111
78
44

740
134
361
8,984
239
78
2

408
7
363
7,314
79
78
40

579
21
266
7,437
216
78
2

10,113

10,538

8,289

8,599

208,814

152,787

135,423

117,243

Provisions for doubtful debts (refer note 15)(2,376)(2,018)(1,655)(1,712)

Income yet to mature(1,476)(1,304)(1)(1)(3,852)(3,322)(1,656)(1,713)204,962

149,465

133,767

115,530

555
2,716

615
2,607

102
1,038

124
1,112

3,271

3,222

1,140

1,236

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

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

financial report I 47

NOTES TO THE FINANCIAL STATEMENTS
13: NET LOANS AND ADVANCES (CONTINUED)
Maturity Distribution and Concentrations of Credit Risk
Based on remaining term to maturity at 30 September 2004
1

Overdraft$m

BetweenLess than 3 months and3 months
12 months$m$m

Between
1 year and5 years$m

After
5 years
$m

Total
$m

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
New Zealand

544
216
76
366
1
–
310
6,260
207
137
597
199

791
559
814
854
87
90
1,432
7,073
185
2,886
1,960
2,441

583
358
850
1,297
2
238
613
143
192
2,406
510
925

1,156
1,025
820
625
15
1,820
1,507
5,521
1,100
10,206
1,822
1,662

1,518
1,188
1,100
406
21
519
872
495
684
66,136
2,737
1,323

4,592
3,346
3,660
3,548
126
2,667
4,734
19,492
2,368
81,7717,626
6,550

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 Markets

113
242
75
75
7
15
186
867
98
620
189
149

792
52
25
316
106
2
342
82
130
2,776
249
349

512
100
198
98
24
137
143
234
91
2,147
158
336

5,388
285
415
2,175
129
333
972
792
216
4,554
634
1,168

2,613
167
178
69
71
6
326
180
89
24,628
314
484

9,418
846
891
2,733
337
493
1,969
2,155
624
34,7251,544
2,486

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

13
10
4
14
26
73
59
6
12
10
216
243

120
7
14
88
4
–
878
46
6
40
243
380

230
5
7
47
11
–
312
53
34
18
95
268

446
54
32
294
69
15
1,110
170
39
277
93
1,105

324
9
20
112
14
23
354
164
6
233
42
1,516

1,133
85
77
555
124
111
2,713
439
97
578
689
3,512

12,235

26,21913,37548,044

108,941

208,814

(384)
(12)

–
(355)

–
(287)

–
(816)

–
(6)

(384)
(1,476)

(396)

(355)

(287)

(816)

(6)

(1,860)11,83925,86413,08847,228108,935

206,954

–

–

–

–

(1,992)(1,992)

11,83925,86413,08847,228106,943

204,962278
11,957

11,02915,190

8,060
5,315

22,05725,98743,72065,671

84,694
124,120

12,235

26,21913,37548,044

108,941

208,814Gross loans and advances
Specific provision for doubtful debts
Income yet to mature

Loans and advances net of specific provision and income yet to mature
General provision
Net loans and advancesInterest rate sensitivity
Fixed interest rates4
Variable interest rates

1
2
3
4

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

48 I financial report

NOTES TO THE FINANCIAL STATEMENTS
13: NET LOANS AND ADVANCES (CONTINUED)
Maturity Distribution and Concentrations of Credit Risk

Based on remaining term to maturity at 30 September 2003
Overdraft1$m

BetweenLess than 3 months and3 months
12 months$m$m

Between
1 year and5 years$m

After
5 years
$m

Total
$m

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
New Zealand

505
243
100
1,355
2
–
345
4,491
223
125
621
170

417
261
588
705
–
113
2,068
5,322
66
1,990
2,086
2,284

655
313
199
897
2
289
479
210
114
1,811
620
647

1,001
869
805
1,733
20
1,701
1,125
5,046
821
9,871
1,241
1,065

1,251
946
940
276
27
510
1,349
579
543
55,863
2,253
1,169

3,829
2,632
2,632
4,966
51
2,613
5,366
15,648
1,767
69,6606,821
5,335

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 Markets

85
7
23
61
7
25
58
43
16
629
51
97

30
1
3
5
2
28
27
171
27
38
10
61

229
–
7
462
6
79
185
202
56
623
100
137

588
35
71
564
62
236
493
375
153
464
385
712

679
96
332
75
70
2
440
39
56
10,198
428
785

1,611
139
436
1,167
147
370
1,203
830
308
11,952974
1,792

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

17
14
6
5
11
73
171
10
13
49
263
242

111
6
16
78
9
4
418
177
14
16
259
191

252
15
17
23
16
4
394
119
8
61
19
195

534
146
32
137
81
10
1,089
202
125
403
186
1,269

231
3
27
106
10
148
379
433
4
278
40
1,369

1,145
184
98
349
127
239
2,451
941
164
807
767
3,266

10,156

17,602

9,445

33,65081,934

152,787

(484)
(96)

–
(287)

–
(256)

–
(661)

–
(4)

(484)
(1,304)

(580)

(287)

(256)

(661)

(4)

(1,788)9,576

17,3159,189

32,98981,930150,999

–

–

–

–

(1,534)(1,534)

9,576

17,3159,189

32,98980,396

149,465

372
9,784

8,585
9,017

4,724
4,721

22,73910,911

19,826
62,10856,24696,541

10,156

17,602

9,445

33,65081,934

152,787

Gross loans and advances
Specific provision for doubtful debts
Income yet to mature

Loans and advances net of specific provision and income yet to mature
General provision
Net loans and advancesInterest rate sensitivity
Fixed interest rates4
Variable interest rates

1
2
3
4

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

financial report I 49

NOTES TO THE FINANCIAL STATEMENTS
14: IMPAIRED ASSETS
Consolidated

Summary of impaired assets
Non-accrual loans
Restructured loans
Unproductive facilities

The Company

2004
$m

2003
$m

2004
$m

2003
$m

829
32
29

1,007
–
39

644
32
29

865
–
38

Gross impaired assets
Specific provisions
Non-accrual loans
Unproductive facilities

890

1,046

705

903

(378)
(6)

(482)
(2)

(268)
(6)

(427)
(2)

Net impaired assets

506

562

431

474

Non-accrual loans
Non-accrual loans
Specific provisions

829
(378)

1,007
(482)

644
(268)

865
(427)

Total net non-accrual loans

451

525

376

438

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

32

–

32

–

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

29
(6)

39
(2)

29
(6)

38
(2)

Net unproductive facilities

23

37

23

36

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

293

213

175

163

Consolidated average non-accrual loans: September 2004 $912 million; September 2003 $1,103 million; September 2002 $1,254 million
Further analysis of impaired assets at 30 September 2004 and interest and/or other income received during the year under Australian Prudential
Regulation Authority guidelines is as follows:Grossbalanceoutstanding$m

Non-accrual loans
Without provisions
Australia
New ZealandOverseas markets

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

Gross
balanceoutstanding$m

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

82
6
27

–
–
–

3
–
7

79
–
27

–
–
–

2
–
6

115

–

10

106

–

8

338
109
265

208
69
100

3
1
5

296
–
241

184
–
83

2
–
5

712

377

9

537

267

7

1
–
1

1
–
–

–
–
–

1
–
–

1
–
–

–
–
–

Total non-accrual loans

2
829

1
378

–
19

1
644

1
268

–
15

Restructured loans
Unproductive facilities

32
29

–
6

–
–

32
29

–
6

–
–

Total impaired assets

890

384

19

705

274

15

1

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

1

With provisions and full performance
Australia
New ZealandOverseas markets

1 A loan’s performance is assessed against its contractual repayment schedule50 I financial report

NOTES TO THE FINANCIAL STATEMENTS
14: IMPAIRED ASSETS (CONTINUED)
Interest and other income forgone on impaired assets
The following table shows the estimated amount of interest and other income that would have been recorded had interest and other income
on non-accrual 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
2004
2003
$m
$m

The Company
2004
2003
$m
$m

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

29
8
25

36
2
31

24
–
15

28
–
23

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

62

69

39

51

Australia
New ZealandOverseas markets

(6)
(1)
(12)

(10)
(1)
(12)

(4)
–
(11)

(9)
–
(11)

Total interest and other income received

(19)

(23)

(15)

(20)

Australia
New ZealandOverseas markets

23
7
13

26
1
19

20
–
4

19
–
12

Total net interest and other income forgone

43

46

24

31

Interest and other income received

Net interest and other income forgone

financial report I 51

NOTES TO THE FINANCIAL STATEMENTS
15: PROVISIONS FOR DOUBTFUL DEBTS
2004$m

Consolidated
2003
$m

2002
$m

Balance at start of year
Acquisition of provisions
Adjustment for exchange rate fluctuations
Charge to statement of financial performance
Significant transactions: special charge to statement of financial performance1
Transfer to specific provision
Recoveries

1,534
216
53
632
–
(525)
82

1,496
–
(49)
614
–
(588)
61

1,386
–
(22)
610
250
(788)
60

1,283
–
16
433
–
(399)
48

1,310
–
(70)
465
–
(460)
38

Total general provision

1,992

1,534

1,496

1,381

1,283

Balance at start of year
Acquisition of provisions
Adjustment for exchange rate fluctuations
Bad debts written off
Transfer from general provision

484
57
(2)
(680)
525

585
–
(49)
(640)
588

500
–
(6)
(697)
788

429
–
(7)
(547)
399

509
–
(43)
(497)
460

Total specific provision

384

484

585

274

429

2,376

2,018

2,081

1,655

1,712

Australia
New Zealand
Other overseas markets

459
80
86

418
45
212

423
54
421

404
–
60

360
–
163

Provision releases

625
(100)

675
(87)

898
(110)

464
(65)

523
(63)

Recoveries of amounts previously written off

525
(82)

588
(61)

788
(60)

399
(48)

460
(38)

Net specific provision
Net credit to general provision

443
189

527
87

728
132

351
82

422
43

Charge to statement of financial performance

632

614

860

433

465

%

%

%

%

%

0.2
1.0

0.3
0.9

0.4
1.1

0.2
0.9

0.3
1.0

0.2
1.0

0.3
1.0

0.4
1.1

0.2
1.0

0.4
1.1

Bad debts written off as a % of total advances3

0.3

0.4

0.5

0.4

0.4

Net specific provision as a % of total advances3

0.2

0.3

0.5

0.2

0.3

The Company
2004
2003
$m
$m

General provision

Specific provision

Total provisions for doubtful debts
Provision movement analysis
New and increased provisions

RatiosProvisions2 as a % of total advances3
Specific
GeneralProvisions2 as a % of risk weighted assets
Specific
General1 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 environment relevant at that time of unexpected investment grade defaults
2 Excludes provisions for unproductive facilities
3 See Glossary on page 141

52 I financial report

NOTES TO THE FINANCIAL STATEMENTS
16: CUSTOMERS’ LIABILITIES FOR ACCEPTANCES
Consolidated
2004
2003
$m
$m

The Company
2004
2003
$m
$m

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

813
572
502
1,081
1,710
5
132
5,073
1,524
994

797
550
473
977
2,251
80
112
5,463
1,810
629

813
572
502
1,081
1,710
5
132
5,073
1,524
994

797
550
473
977
2,251
80
112
5,463
1,810
629

12,40613,142

12,40613,142

6
44
10
–

11
20
4
1

6
44
10
–

11
20
4
1

60

36

60

36

12,466

13,17812,466

13,178Overseas
Financial, investment and insurance
Manufacturing
Retail and wholesale trade
Other

Total customers’ liabilities for acceptances

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

17: REGULATORY DEPOSITS

Overseas central banks

Consolidated
2004
2003
$m
$m

The Company
2004
2003
$m
$m

176

144

101

68

financial report I 53

NOTES TO THE FINANCIAL STATEMENTS
18: SHARES IN CONTROLLED ENTITIES, ASSOCIATES AND JOINT VENTURE ENTITIESRefer notes 43 to 45 for details.
Consolidated
2004
2003
$m
$m

The Company
2004
2003
$m
$m

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

–
263
1,697

–
166
1,648

11,472
45
–

8,054
41
–

Total shares in controlled entities, associates and joint venture entities

1,960

1,814

11,517

8,095

ACQUISITIONS OF CONTROLLED ENTITIES
During the year ended 30 September 2004 the following material controlled entities were acquired:
On 1 December 2003, the Company acquired NBNZ Holdings Ltd and its controlled entities (NBNZ). Details of the acquisition are disclosed
in note 42. The operating results of these acquired entities have been included in consolidated operating profit since acquisition.
A restructuring provision of $25 million was established for restructuring the operations of the acquired entities. A balance of $24 million
remains in the provision at 30 September 2004. On 26 June 2004, NBNZ was amalgamated into ANZ Banking Group (New Zealand) Limited.
ANZ Banking Group (New Zealand) Limited changed its name to ANZ National Bank Limited on 28 June 2004.
There were no material controlled entities acquired during the year ended 30 September 2003.

DISPOSALS OF CONTROLLED ENTITIESThere were no material controlled entities disposed of during the years ended 30 September 2004 and 2003.

19: DEFERRED TAX ASSETS
Consolidated
2004
2003
$m
$m

The Company
2004
2003
$m
$m

650
804

505
660

442
295

414
332

1,454

1,165

7371

746

959
495

874
291

636
101

605
141

1,454

1,165

737

746

Future income tax assets comprises
General provision for doubtful debts
Other
Total income tax assets
Future income tax assets
Australia
Overseas

1 Gross deferred tax assets for the Company $1,060 million (2004) less intercompany liability to tax consolidated controlled entities $323 million (2004)

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 $nil, 2003: nil), and fromrealised capital losses (benefits could amount to $67 million, 2003: 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; andiii) there are no changes in taxation legislation adversely affecting the benefit of the taxation deductions.

54 I financial report

NOTES TO THE FINANCIAL STATEMENTS
20: GOODWILL
Consolidated
2004
2003
$m
$m

The Company
2004
2003
$m
$m

Goodwill – at cost
Accumulated amortisation

3,509
(240)

248
(88)

123
(49)

128
(41)

Total goodwill1

3,269

160

74

87

1 Excludes notional goodwill related to the ING Australia joint venture of $754 million (September 2003: $821 million)

21: OTHER ASSETS
Consolidated
2004
2003
$m
$m

The Company
2004
2003
$m
$m

Property held for resale
Cost of acquisition
Provision for diminution in value

–
–

2
–

–
–

–
–

–

2

–

–

Accrued interest/prepaid discounts
Accrued commission
Prepaid expenses
Treasury instruments revaluations
Security settlements
Operating leases residual valueLife insurance business investments
Other

1,568
82
71
4,456
952
535
65
1,429

1,085
81
70
5,963
373
461
–
2,189

1,181
55
10
3,738
10
–
–
757

859
55
13
5,379
360
–
–
1,376

Total other assets

9,158

10,224

5,751

8,042

financial report I 55

NOTES TO THE FINANCIAL STATEMENTS
22: PREMISES AND EQUIPMENT
Consolidated
2004
2003
$m
$m

The Company
2004
2003
$m
$m

Freehold and leasehold land and buildings
At cost1
Provision for depreciation

472
(24)

442
(16)

31
(1)

22
(1)

448

426

30

21

209
(148)

168
(116)

117
(78)

108
(71)

61

52

39

37

920
(614)

725
(488)

519
(342)

507
(324)

306

237

177

183

964
(712)

853
(572)

646
(462)

636
(419)

252

281

184

217

728
(298)

624
(159)

614
(239)

560
(139)

430

465

375

421

35

24

21

18

1,532

1,485

826

897

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
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 formeasuring the class of assets ‘land and buildings’.
As all properties are carried at deemed cost subject to individually meeting a recoverable amount test, valuations are carried out on allproperties with a carrying value in excess of $1 million every three years. Properties carrying values are not increased to market values if
valuations exceed carrying amounts. However, if the valuation of an individual property is determined to be less than its carrying amount,
it will be written down to the lower amount.
The properties are subject to external valuation by independent valuers. Valuations are based on the estimated open market value andassume that the properties concerned continue to be used in their existing manner by the Group.
The independent valuation of the Group’s freehold land and buildings was carried out as at 30 June 2002 by Jones Lang La Salle Advisory
and resulted in a valuation of $464 million (The Company: $32 million). As land and buildings are recorded at deemed cost, the valuation
was not brought to account.
At 30 September 2004, the recoverable amount review of properties, with net carrying values equal to or greater than $2 million wascompleted. Properties were reviewed for the existence of impairment indicators that might provide evidence that the property's recoverable
amount exceeded its carrying value. One property was identified as impaired and a loss of $2 million was booked.
Group accounting policy covering the amortisation of software costs capitalised are detailed in note 1(xiv). As at 30 September 2004 theweighted average amortisation period is 5 years.

56 I financial report

NOTES TO THE FINANCIAL STATEMENTS
22: PREMISES AND EQUIPMENT (CONTINUED)
Reconciliations of the carrying amounts for each class of premises and equipment are set out below:
Consolidated
2004
2003
$m
$m

The Company
2004
2003
$m
$m

Freehold and leasehold land and buildings
Carrying amount at beginning of year
Additions
Acquisitions1
Disposals2
Depreciation
Net foreign currency exchange difference

426
15
53
(43)
(4)
1

455
13
–
(35)
(4)
(3)

21
10
–
(1)
–
–

27
4
–
(7)
(1)
(2)

Carrying amount at end of year

448

426

30

21

Carrying amount at beginning of year
Additions
Acquisitions1
Disposals
Amortisation
Net foreign currency exchange difference

52
17
10
(6)
(13)
1

44
25
–
(2)
(15)
–

37
9
–
–
(7)
–

30
16
–
–
(9)
–

Carrying amount at end of year

61

52

39

37

Carrying amount at beginning of year
Additions
Acquisitions1
Disposals
Depreciation
Net foreign currency exchange difference

237
111
79
(66)
(52)
(3)

231
56
–
(1)
(45)
(4)

183
58
–
(33)
(29)
(2)

161
50
–
–
(26)
(2)

Carrying amount at end of year

306

237

177

183

Carrying amount at beginning of year
Additions
Acquisitions1
Disposals
Depreciation
Net foreign currency exchange difference

281
80
14
(14)
(111)
2

283
110
–
(12)
(100)
–

217
65
–
(26)
(72)
–

235
94
–
(36)
(75)
(1)

Carrying amount at end of year

252

281

184

217

Carrying amount at beginning of year
Additions
Acquisitions1
Writeoffs4
Amortisation

465
114
17
(37)
(129)

419
141
–
(12)
(83)

421
92
–
(34)
(104)

389
115
–
(10)
(73)

Carrying amount at end of year

430

465

375

421

Carrying amount at beginning of year
Net additions (transfers)
Acquisitions1

24
8
3

32
(8)
–

18
3
–

24
(6)
–

Carrying amount at end of year

35

24

21

18

Total premises and equipment

1,532

1,485

826

897

Leasehold improvements

Furniture and equipment3

Computer and office equipment

SoftwareCapital works in progress

1
2
3
4

Relates to NBNZ acquisition at 1 December 2003. Additions after this date are included in the “Additions” lines
Includes $2 million writedown in carrying value of one property
Includes integrals
Software writeoffs arose where projects were terminated and the software no longer utilisedfinancial report I 57

NOTES TO THE FINANCIAL STATEMENTS
23: DUE TO OTHER FINANCIAL INSTITUTIONS
Consolidated
2004
2003
$m
$m

The Company
2004
2003
$m
$m

Australia
Overseas

1,346
6,003

1,652
4,815

1,345
4,515

1,652
3,838

Total due to other financial institutions

7,349

6,467

5,860

5,490

At callLess than 3 months
Between 3 months and 12 months
Between 1 year and 5 years

2,255
4,152
662
280

2,887
2,893
686
1

1,853
3,346
661
–

1,948
2,859
682
1

Total due to other financial institutions

7,349

6,467

5,860

5,490

Maturity analysis based on remaining term to maturity at 30 September

24: DEPOSITS AND OTHER BORROWINGS
Deposits and other borrowings are classified between Australia and Overseas based on the location of the deposit taking point.
Consolidated
2004
2003
$m
$m

The Company
2004
2003
$m
$m

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

12,221
22,61545,155
4,005
4,708
7,214
78
509

7,029
19,26340,864
3,881
5,458
6,822
299
713

12,221
23,27345,155
4,005
2,099
–
78
509

7,029
19,81440,852
3,881
3,722
–
299
713

96,50584,32987,34076,3104,844
30,941
15,891
4,207
14,072
2,034
63

3,119
19,683
6,536
1,950
6,981
1,797
99

1,365
9,629
782
632
–
–
63

1,786
10,768
771
452
–
–
99

72,05240,165

12,471

13,876

168,557

124,494

99,811

90,186

At callLess than 3 months
Between 3 months and 12 months
Between 1 year and 5 years
After 5 years

68,421
74,186
17,9237,923
104

52,72656,587
10,3004,860
2150,01337,783
7,337
4,662
16

45,22537,323
5,291
2,335
12

Total deposits and other borrowings

168,557

124,494

99,811

90,186

Overseas
Certificates of deposit
Term deposits
Other deposits bearing interest
Deposits not bearing interest
Commercial paper
Borrowing corporations’ debt 2
Other borrowings

Total deposits and other borrowings
Maturity analysis based on remaining term to maturity at 30 September

1 Included in this balance is debenture stock of controlled entities. $7.2 billion of debenture stock of the consolidated subsidiary company Esanda together with accrued interest thereon, is secured by atrust deed and collateral debentures, giving floating charges upon the undertaking and all the assets of the entity other than land and buildings ($12,100 million). All controlled entities of Esanda(except for some controlled entities 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 Company. The only loans pledged as collateral are those in Esanda and its subsidiaries
2 This balance represents NZ$2.2 billion of secured debenture stock of the consolidated subsidiary UDC Finance Limited and the interest accruals thereon are secured by a floating charge over all assetsof the UDC Finance Limited and its' subsidiaries (NZ$2,527 million)

58 I financial report

NOTES TO THE FINANCIAL STATEMENTS
25: INCOME TAX LIABILITIESConsolidated
2004
2003
$m
$m

The Company
2004
2003
$m
$m

Australia
Provision for income tax
Provision for deferred income tax

242
1,354

(303)
1,168

203
921

(381)
801

1,596

865

1,124

420

93
225

52
166

18
109

26
100

318

218

127

126

1,914

1,083

1

1,251

546

166
497
916

95
511
728

79
497
454

46
511
344

1,579

1,334

1,030

901

Overseas
Provision for income tax
Provision for deferred income tax

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

1 Gross income tax liabilities for the company $1,724 million (2004) less intercompany asset to tax consolidated controlled entities $473 million (2004)

26: PAYABLES AND OTHER LIABILITIESConsolidated
2004
2003
$m
$m

The Company
2004
2003
$m
$m

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

4,746
1,169
3,274
297
1
438

3,102
864
5,997
312
165
693

4,700
1,051
3,781
255
1
291

3,145
758
5,995
299
165
642

9,925

11,133

10,07911,004

145
647
2,382
237
378
30
468

197
341
1,335
143
–
–
462

1
259
143
43
–
–
365

5
178
104
49
–
–
331

4,287

2,478

811

667

14,212

13,611

10,89011,671

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

Total payables and other liabilitiesfinancial report I 59

NOTES TO THE FINANCIAL STATEMENTS
27: PROVISIONS
Consolidated
2004
2003
$m
$m

The Company
2004
2003
$m
$m

Employee entitlements1
Dividends (refer note 7)
Non-lending losses, frauds and forgeries
Restructuring costs and surplus leased space
Other

333
–
171
106
235

269
–
164
92
244

248
–
125
66
179

237
–
128
68
181

Total provisions

845

769

618

614

1 The aggregate liability for employee benefits largely comprise employee entitlements provisions plus liability for payroll tax and fringe benefits tax. The aggregate liability as at 30 September 2004
was $456 million consolidated and $284 million for the company (30 September 2003: was $362 million consolidated and $263 million for the company)

Reconciliations of the carrying amounts of each class of provisions, except for employee entitlements are set out below:
Consolidated
2004
2003
$m
$m

The Company
2004
2003
$m
$m

Dividends1
Carrying amount at beginning of the year
Final ordinary dividendInterim ordinary dividend
Preference share dividend
Payments made during the year2

–
777
850
98
(1,725)

692
n/a
666
102
(1,460)

–
777
850
98
(1,725)

692
n/a
666
102
(1,460)

–

–

–

–

Carrying amount at beginning of the year
Acquisition provision (NBNZ)
Provision made during the year
Payments made during the year
Release of Provisions
Adjustment for exchange rate fluctuations

92
27
69
(68)
(15)
1

143
–
45
(80)
(16)
–

68
–
63
(50)
(15)
–

103
–
43
(62)
(16)
–

Carrying amount at the end of the year

106

92

66

68

Carrying amount at beginning of the year
Provision made during the year
Payments made during the year
Release of Provisions

164
18
(7)
(4)

216
17
(59)
(10)

128
4
(3)
(4)

184
6
(57)
(5)

Carrying amount at the end of the year

171

164

125

128

Carrying amount at beginning of the year
Provision made during the year
Payments made during the year
Release of Provisions
Adjustment for exchange rate fluctuations

244
209
(173)
(46)
1

298
153
(130)
(76)
(1)

181
165
(127)
(40)
–

268
111
(129)
(68)
(1)

Carrying amount at the end of the year

235

244

179

181

Carrying amount at the end of the year
3

Restructuring costs and surplus leased space4

Non-lending losses frauds and forgeries

5

Other provisions

1 A provision for dividends payable will be recognised in the reporting period in which the dividends are declared, determined, or publicly recommended. Current practice is to publicly announce
dividends after the reporting period to which the dividend relates
2 Includes issue of ordinary shares under the Bonus Option Plan (2004: $29 million; 2003: $25 million)
3 Restructuring costs and surplus leased space provisions arise from exit activities related to material changes in the scope of business undertaken by the Group or the manner in which that business isundertaken, and includes termination benefits. Costs related to on-going activities are not provided for. Provision is made when the Group is demonstrably committed, it is probable that the costs will
be incurred, though its timing is uncertain, and the costs can be reliably estimated
4 Non-lending losses, frauds and forgeries provisions arise from inadequate or failed internal processes and systems, or from external events
5 Other provisions comprise various other provisions including fringe benefits tax, fleet maintenance, workers’ compensation and other non-employee entitlement provisions

60 I financial report

NOTES TO THE FINANCIAL STATEMENTS
28: BONDS AND NOTES
Consolidated
2004
2003
$m
$m

The Company
2004
2003
$m
$m

Bonds and notes by currency
USD
GBP
AUD
NZD
JPY
EUR
HKD
CHF
CAD
NOK
SGD

United States dollars
Great British pounds
Australian dollars
New Zealand dollars
Japanese yen
EuroHong Kong dollars
Swiss francs
Canadian dollars
Norwegian krone
Singapore dollars

4,718
3,896
979
667
1,433
10,863
2,805
831
1,258
82
70

5,772
1,758
688
31
304
4,903
2,259
389
184
84
200

4,262
3,896
979
33
1,433
9,571
2,619
831
1,258
82
70

5,331
1,758
688
31
304
4,903
2,259
389
184
84
200

27,602

16,57225,034

16,131Maturity 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

419
4,238
22,870
75

269
3,652
12,651–419
4,145
20,395
75

269
3,652
12,210–Total bonds and notes

27,602

16,57225,034

16,131

Total bonds and notes
Bonds and notes by maturity

financial report I 61

NOTES TO THE FINANCIAL STATEMENTS
29: LOAN CAPITAL
Interest
Rate%

Consolidated
2004
2003
$m
$m

The Company
2004
2003
$m
$m

Hybrid loan capital (subordinated)
US Stapled trust security issue
USD 350m cumulative trust securities due 2053
USD 750m cumulative trust securities due 2053

4.484
5.36

488
1,047

–
–

488
1,047

–
–

1,535

–

1,535

–

419

442

419

442

419

442

419

442

–
698
6
11
7
14
110
93
93
400
100
118
118
280
93
768
860
516
350
380
502
1,004

367
735
6
17
8
20
115
–
–
400
100
–
–
263
–
808
854
512
–
–
–
983

–
698
6
11
7
14
110
–
–
400
100
–
–
–
–
768
860
516
350
380
502
1,004

367
735
6
17
8
20
115
–
–
400
100
–
–
–
–
808
854
512
–
–
–
983

6,521

5,188

5,726

4,925

8,475

5,630

7,680

5,367

1,230
795
3,555
1,506
1,376
13

500
263
2,504
983
1,366
14

1,230
–
3,555
1,506
1,376
13

500
–
2,504
983
1,366
14

8,475

5,630

7,680

5,367

–
846
7,210

368
736
4,084

–
846
6,415

368
736
3,821

419

442

419

442

8,475

5,630

7,680

5,367

Perpetual subordinated notes
USD 300m

floating rate notes

LIBOR1 + 0.15

Subordinated notes
USD 250m fixed notes due 2004
USD 500m fixed notes due 2006
JPY 482m floating rate notes due 2007
USD 7.9m floating rate notes due 2007
JPY 568.8m floating rate notes due 2008
USD 10m
floating rate notes due 2008
USD 79m
floating rate notes due 20082
NZD 100m fixed notes due 2010
NZD 100m fixed notes due 2011
AUD 400m floating rate notes due 2012
AUD 100m floating rate notes due 2012
NZD 125m fixed notes due 2012
NZD 125m fixed notes due 2012
NZD 300m floating rate notes due 2012
NZD 100m fixed notes due 2013
USD 550m floating rate notes due 20133
EUR 500m fixed/floating rate notes due 20134
EUR 300m floating rate notes due 20135
AUD 350m fixed notes due 2014
AUD 380m floating rate notes due 2014
GBP 200m fixed notes due 2015
GBP 400m fixed notes due 2018

Total loan capital

6.25
7.55
LIBOR + 0.50
LIBOR + 0.50
LIBOR + 0.55
LIBOR + 0.50
LIBOR + 0.53
8.36
6.87
BBSW + 0.57
BBSW + 0.57
7.40
7.61
BKBM(3) + 0.50
6.46
LIBOR(3) + 0.55
4.45
EURIBOR(3) + 0.375
6.50
BBSW(3) + 0.41
5.625
4.75

Loan capital by currency
AUD Australian dollars
NZD New Zealand dollars
USD United States dollars
GBP Great British pounds
EUR Euro
JPY Japanese yen

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

1
2
3
4
5

LIBOR is an average of rates offered on loans to leading banks in the London inter-bank market
Prior to January 2002, the interest rate was LIBOR+ 1.03
After February 2008 rate changes to LIBOR (3) + 1.05
After February 2010 rate changes to EURIBOR (3) + 0.50
After August 2008 rate changes to EURIBOR (3) + 0.875

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. The loan capital, except for the
US Stapled Trust Security Issue constitutes tier 2 capital as defined by the Australian Prudential Regulation Authority (APRA) for capital adequacy purposes. The US Stapled Trust Security Issue constitutes
Tier 1 capital as defined by APRA for capital adequacy purposes.

62 I financial report

NOTES TO THE FINANCIAL STATEMENTS
29: LOAN CAPITAL (CONTINUED)US STAPLED TRUST SECURITY ISSUE
On 27 November 2003, ANZ raised USD1.1 billion via the issue of non-cumulative trust securities, to support the capital and funding base of
the Group following the decision to acquire NBNZ. The issue was structured as a stapled security along similar lines as ANZ StEPS, withinvestors purchasing a fully paid, non-coupon paying preference share issued by the parent and a fully paid, coupon paying, note issued by aspecial purpose NZ subsidiary (Samson Funding Limited). The Trust Security can be de-stapled and the investor left with a coupon paying
preference share at ANZ's discretion at any time, or at the investor's discretion under certain circumstances. The issue was made in two tranches:> USD750 million tranche with a coupon of 5.36%. After 15 December 2013 and at any coupon date thereafter, ANZ has the discretion toredeem the Trust Securities for cash. If it does not exercise this discretion, the investor is entitled to require ANZ to exchange the Trust
Security into a number of ordinary shares based on the formula in the offering memorandum.
> USD350 million tranche with a coupon of 4.484% which has the same conversion features as the USD750 million but
from 15 January 2010.
If the Trust Securities are not redeemed or bought back prior to 15 December 2053 they will convert into preference shares, which in turn will
mandatorily convert into a number of ordinary shares, based on the formula in the offering memorandum.
The US Stapled Trust Securities qualify as Tier 1 capital as defined by the Australian Prudential Regulation Authority, however, the Securities
are reported as debt under Australian, International and US Accounting Standards with the coupon payment classified as interest expense.

30: SHARE CAPITAL
Number of issued shares

2004

The Company
2003

2002

Ordinary shares each fully paid
Preference shares each fully paid

1,818,401,807
10,000,000

1,521,686,560
134,032,000

1,503,886,082
124,032,000

Total number of issued shares

1,828,401,807

1,655,718,560

1,627,918,082

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 ofand 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 eachshare is entitled to one vote.
Number of issued shares

2004

The Company
2003

2002

Balance at start of year
Bonus option plan
Dividend reinvestment plan
ANZ employee share acquisition plan
ANZ share option plan
ANZ share purchase scheme ANZ rights issue

1,521,686,560
1,771,864
7,815,830
3,891,9786,387,809
276,847,766

1,503,886,082
1,534,987
6,223,866
3,615,714
6,425,911–

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

Balance at end of year

1,818,401,807

1,521,686,560

1,503,886,082

For a reconciliation of the movement in ordinary share capital refer to Statement of Changes in Shareholders’ Equity on page 27

financial report I 63

NOTES TO THE
FINANCIAL STATEMENTS
30: SHARE CAPITAL (CONTINUED)
PREFERENCE SHARESa) Trust Securities Issues (ANZ TrUEPrS)ANZ TrUEPrS were 124,032,000 fully paid
non-converting non-cumulative preference
shares issued for USD6.25 per share via
Trust Securities Issues in 1998.
The Trust Securities were mandatorily
exchangeable for the preference sharesissued by the Company, and carried anentitlement to a non-cumulative trust
distribution of 8.00% or 8.08% perannum payable quarterly in arrears.
The Trust Securities were issued by anon diversified closed end management
investment company registered under the
US Investment Company Act of 1940.
The preference shares themselves carried
no present entitlement to dividends.
Distributions to investors in the Trust
Securities were funded by income
distributions made by the Group.
Upon maturity of the Trust Securities in
2048, investors would have mandatorily
exchanged the Trust Securities for the
preference shares and thereupon thepreference shares would have carried anentitlement to non-cumulative dividendsof 8.00% or 8.08% per annum payable
quarterly in arrears. The mandatoryexchange of the Trust Securities for the
preference shares could have occurredearlier at the Company’s option or in
specified circumstances.
With the prior consent of the Australian
Prudential Regulation Authority, thepreference shares were redeemable at theCompany’s option after 5 years, or within
5 years in limited circumstances. The
entitlement of investors to distributions
on the Trust Securities would have ceasedon redemption of the preference shares.
The transaction costs arising on the issueof these instruments were recognised
directly in equity as a reduction of theproceeds of the equity instruments towhich the costs related.

On 12 December 2003, the Group boughtback its 124,032,000 preference sharesissued via Trust Securities Issues for$1,045 million.
b) ANZ Stapled Exchangeable Preferred
Securities (ANZ StEPS)
On 23 September 2003, the Company
issued 10 million ANZ StEPS at $100
each pursuant to a prospectus dated
14 August 2003 raising $1 billion(excluding issue costs of $13 million:
net raising $987 million). ANZ StEPS
comprise two fully paid securities - aninterest paying unsecured note (issued
by ANZ Holdings (New Zealand) Limited,
a wholly owned subsidiary of the Company)
stapled to a fully paid preference share(issued by the Company).
Distributions on ANZ StEPS are noncumulative and are payable quarterly inarrears based upon a floating distribution
rate equal to the 90 day bank bill rate plus
a margin. At each payment date the
90 day bank bill rate is reset for the next
quarter. Distributions are subject tocertain payment tests (ie APRA
requirements and distributable profits
being available) and the basis for theircalculation may change on any reset date.
Distributions are expected to be payable
on 15 March, 15 June, 15 September and
15 December of each year. Dividends are
not payable on the preference share while
it is stapled to the note. If distributions
are not paid on ANZ StEPS, the Company
may not pay dividends or return capital on
its ordinary shares or any other sharecapital ranking below the preference
share component.
On any reset date, ANZ may change
certain terms (subject to certain
restrictions) including the next reset date,market reset (from floating rate to a fixed
rate, or vice versa), margin and thefrequency and timing of the distribution
payment dates. The first reset date is
15 September 2008. Holders of ANZ
StEPS can require exchange on any reset
date or earlier if certain specified eventsoccur. On exchange, a holder will receive(at the Company’s discretion) either $100
cash for each ANZ StEPS exchanged or anumber of ordinary shares calculated inaccordance with a conversion ratio basedon $100 divided by the market price ofordinary shares at the date of conversion
less 2.5%. In certain circumstances, theCompany may also require exchange otherthan on a reset date.

Upon the occurrence of an assignment
event, ANZ StEPS become unstapled.
In this case, the note will be assigned
from the holder, however, the holder willretain the preference share and the rights
to exchange the preference share.
The preference shares forming part of
ANZ StEPS rank equally with the preference
shares issued in connection with Trust
Securities Issues in all respects. Except incertain limited circumstances, holders of
ANZ StEPS do not have any right to vote ingeneral meetings of the Company.
On a winding up of the Company, the rights
of ANZ StEPS holders will be determinedby the preference share component of ANZ
StEPS. Those preference shares rankbehind all depositors and creditors, butahead of ordinary shareholders.
The transactions costs arising on the issueof these instruments were recognised
directly in equity as a reduction of theproceeds of the equity instruments towhich the costs relate.

64 I financial report

NOTES TO THE FINANCIAL STATEMENTS
30: SHARE CAPITAL (CONTINUED)
Consolidated
2004
2003
$m
$m

The Company
2004
2003
$m
$m

Preference share balance at start of year
- ANZ TrUEPrS (USD748 million)1- ANZ StEPS1

1,225
987

1,375
–

1,225
987

1,375
–

Retranslation of ANZ TrUEPrS2
Buyback of ANZ TrUEPrS3

2,212–(1,225)

1,375
(150)
–

2,212
–
(1,225)

1,375
(150)
–

987

1,225

987

1,225

–

987

–

987

Preference share net proceeds from new issues during the year
- ANZ StEPS1

987

2,212

987

2,212

Preference share balance at end of year
- ANZ TrUEPrS (USD748 million)1- ANZ StEPS1

–
987

1,225
987

–
987

1,225
987

Balance at end of year

987

2,212

987

2,212

1 Net of issue costs
2 From 1 October 2002, the net proceeds are translated at the spot rate applicable at date of issue. Before 1 October 2002, the net proceeds were translated at the current spot rate at each reporting
period and recorded in FCTR. Refer note 1
3 ANZ TrUEPrS bought back on 12 December 2003 for $1,045 million

Share Buybacks
The Company conducted no on-market buybacks during the years ended 30 September 2004 and 2003. The Company announced theintention to undertake an on-market share buyback of at least $350 million post year end. (Refer note 58).

31: OUTSIDE EQUITY INTERESTS
Consolidated
2004
2003
$m
$m

Share capital
Retained Profits

1
17

2
15

Total outside equity interests

18

17

financial report I 65

NOTES TO THE FINANCIAL STATEMENTS
32: CAPITAL ADEQUACY
The Australian Prudential Regulation Authority (APRA) adopts a risk-based capital assessment framework for Australian banks based oninternationally accepted capital measurement standards. This risk-based approach requires eligible capital to be divided by total risk
weighted assets, with the resultant ratio being used as a measure of a bank’s capital adequacy.
Capital is divided into tier 1, or ‘core’ capital, and tier 2, or ‘supplementary’ capital. For capital adequacy purposes, eligible tier 2 capitalcannot exceed the level of tier 1 capital. Banks are required to deduct from total capital any strategic holdings of other banks’ capital
instruments and investments in entities engaged in life insurance, funds management and securitisation activities. Under APRA guidelines,banks must maintain a ratio of qualifying capital 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 offinancial position assets and to credit converted off balance sheet exposures. Categories of risk weights are assigned based upon the natureof the counterparty and the relative liquidity of the assets concerned and: b) The recognition of risk weighted assets attributable to market
risk arising from trading and commodity positions. Trading and commodity balance sheet positions do not attract a risk weighting under thecredit risk-based approach.
Consolidated
2004
2003
$m
$m

Qualifying capital
Tier 1
Total shareholders’ equity and outside equity interests
Hybrid loan capital1
Asset revaluation reserve
Dividend2
Accumulated retained profits and reserves of insurance, funds management and securitisation entities
Unamortised goodwill and other intangibles3
Capitalised expenses4
Investment in ANZ Lenders Mortgage Insurance

17,925
1,535
(31)
(983)
(218)
(4,170)(465)(27)

13,787
–
(31)
(777)
(168)
(1,044)–(27)

Tier 1 capital

13,566

11,740Tier 2
Asset revaluation reserve
Perpetual subordinated notes
General provision for doubtful debts5

31
419
1,342

31
442
1,029

1,792

1,502

Subordinated notes

6,052

4,563

Tier 2 capital

7,844

6,065

Deductions
Investment in Funds Management and securitisation entities
Investment in joint venture with INGA
Other

(107)
(708)
(204)

(56)
(708)
(156)

(1,019)(920)

20,391

16,885

6

Total qualifying capital
7

Adjusted common equity

10,012

8,679

Total risk weighted assets

196,664

152,164%%

Tier 1
Tier 2
Deductions

6.9
4.0
(0.5)

7.7
4.0
(0.6)

Total

10.4

11.1

Adjusted common equity7

5.1

5.7

Capital adequacy ratios

1
2
3
4
5
6
7

Represents the US Stapled Trust Security Issue approved by APRA as qualifying for Tier 1 status. Refer note 29
Relates to final dividend not provided forFrom 1 July 2003 the intangible component of investments is deducted from Tier 1 Capital. Prior to this, the deduction was from total capital
From 1 July 2004, APRA requires certain capitalised expenses to be deducted from Tier 1 Capital
Net of attributable future income tax benefit
For capital adequacy calculation purposes, subordinated note issues are reduced by 20% of the original amount during each of the last five years to maturity
Tier 1 capital, less preference share capital (converted at 30 September 2004 rates), less deductions

66 I financial report

NOTES TO THE FINANCIAL STATEMENTS
32: CAPITAL ADEQUACY (CONTINUED)
AssetsRisk weighted assets
2004
2003
$m
$m

2004
$m

2003
$m

Statement of financial position
Cash, claims on Australian Commonwealth, State Governments,
Territory Governments, 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
Other assets – credit risk

24,467
12,593106,013113,218

19,8178,350
76,711
88,042–2,519
53,007113,218–
1,670
38,35588,042

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

256,291
3,054

192,920
2,671

168,744n/a

128,067
n/a

Total statement of financial position assets

259,345

195,591

168,744

128,067

2004$m

Contract/
notional amount
2003
$m

2004
$m

Creditequivalent
2003$mDirect credit substitutes

10,262

9,771

10,262

9,771

8,173

8,115

Trade and performance related items
Commitments
Foreign exchange, interest rate and other market related transactions

11,887
78,914
672,500

10,78265,396
516,773

5,265
12,385
11,692

4,864
7,632
11,4694,728
10,239
3,790

4,502
7,422
3,387

Total off balance sheet exposures – credit risk

773,563

602,722

39,60433,736

26,93023,426

195,674

151,493990

671

196,664

152,164

Risk
weighted assets
2004
2003
$m
$m

Off balance sheet exposures

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

financial report I 67

NOTES TO THE FINANCIAL STATEMENTS
33: 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.
2004

2003

2002

Averagebalance$mInterest$m

Averagerate%

Averagebalance$mInterest$m

Averagerate%

Averagebalance$mInterest$m

Average
rate
%

578
2,728
2,322

29
137
43

5.0
5.0
1.9

432
582
2,046

21
23
48

4.9
4.0
2.3

653
570
2,404

26
26
69

4.0
4.6
2.9

7,231
3,038
3,175

389
150
95

5.4
4.9
3.0

6,390
1,642
1,870

301
73
78

4.7
4.4
4.2

5,384
1,253
1,550

259
55
82

4.8
4.4
5.3

Australia
New ZealandOverseas markets
Other assets

129,658
48,346
9,810

8,893
3,701
421

6.9
7.7
4.3

110,260
20,365
12,213

7,263
1,637
503

6.6
8.0
4.1

95,84618,12914,195

6,273
1,363
627

6.5
7.5
4.4

Australia
New ZealandOverseas markets
Intragroup assets

1,524
1,808
1,935

127
36
127

8.3
2.0
6.6

1,606
1,353
3,395

105
46
140

6.5
3.4
4.1

1,463
1,349
3,124

17
83
179

1.2
6.2
5.7

Overseas markets

10,670

225

2.1

9,858

200

2.0

9,525

211

2.2

Intragroup elimination

222,823(10,670)

14,373(225)

172,012(9,858)10,438(200)

155,445(9,525)

9,270
(211)

212,153

14,148

162,154

10,238145,920

9,059

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

6.7

6.3

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

13,39854
1,460
18,224

13,492
88
1,436
15,781

14,556152
1,349
18,189(1,762)(481)(66)(1,838)(211)(75)(1,805)(176)(58)

30,82728,67332,207

242,980

190,827

178,127

Australia
New ZealandOverseas markets

162,944
61,027
29,679142,491
25,33332,861

130,515
22,60734,530Intragroup elimination

253,650(10,670)

200,685(9,858)

187,652(9,525)242,980

190,827

178,127

32.9%

25.3%

26.7%

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

6.2

68 I financial report

NOTES TO THE FINANCIAL STATEMENTS
33: AVERAGE BALANCE SHEET AND RELATED INTEREST (CONTINUED)
2004

2003

2002

Averagebalance$mInterest$m

Averagerate%

Averagebalance$mInterest$m

Averagerate%

Averagebalance$mInterest$m

Averagerate%

30,83920,91012,772

1,589
1,138
296

5.2
5.4
2.3

25,171
10,666
14,738

1,165
570
336

4.6
5.3
2.3

20,741
8,894
15,113

937
456
417

4.5
5.1
2.8

Australia
New ZealandOverseas markets
Other demand deposits

13,017
6,463
386

352
212
3

2.7
3.3
0.8

11,959
3,285
405

279
79
3

2.3
2.4
0.7

10,964
3,113
449

245
76
7

2.2
2.4
1.6

Australia
New ZealandOverseas markets
Due to other financial institutions

29,737
6,428
662

1,182
256
9

4.0
4.0
1.4

26,718
2,108
642

963
98
9

3.6
4.6
1.4

23,397
1,903
704

792
78
11

3.4
4.1
1.6

Australia
New ZealandOverseas markets
Commercial paper

1,452
1,608
3,736

85
76
77

5.9
4.7
2.1

957
631
6,446

49
23
111

5.1
3.6
1.7

942
514
7,399

49
17
180

5.2
3.3
2.4

Australia
New ZealandOverseas markets
Borrowing corporations’ debt

5,824
6,764
6,485

308
383
74

5.3
5.7
1.1

5,216
–
4,740

252
–
58

4.8
–
1.2

3,888
–
3,641

178
–
73

4.6
–
2.0

Australia
New Zealand
Loan capital, bonds and notes

7,092
1,925

371
110

5.2
5.7

6,626
1,824

337
108

5.1
5.9

6,097
1,472

316
88

5.2
6.0

Australia
New ZealandOverseas markets
Other liabilities1

29,631
2,009
150

1,575
121
3

5.3
6.0
2.0

19,783
521
184

1,011
37
4

5.1
7.1
2.2

15,639
441
540

756
30
15

4.8
6.8
2.8

Australia
New ZealandOverseas markets
Intragroup Liabilities

4,232
40
82

543
83
17

n/a
n/a
n/a

2,714
96
33

292
97
23

n/a
n/a
n/a

1,463
117
37

167
98
33

n/a
n/a
n/a

Australia
New Zealand

5,644
5,026

(19)
244

(0.3)
4.9

7,926
1,932

134
66

1.7
3.4

6,778
2,747

128
83

1.9
3.0

202,914(10,670)

9,088
(225)

155,321(9,858)

6,104
(200)

136,993(9,525)

5,230
(211)

192,244

8,863

145,463

5,904

127,468

5,019Interest bearing liabilities
Time deposits
Australia
New ZealandOverseas markets
Savings deposits

Intragroup elimination

1 Includes foreign exchange swap costs

4.6

4.1

3.9

financial report I 69

NOTES TO THE FINANCIAL STATEMENTS
33: AVERAGE BALANCE SHEET AND RELATED INTEREST (CONTINUED)
2004
Averagebalance$m

2003
Averagebalance$m

2002
Averagebalance$m

Deposits
Australia
New ZealandOverseas markets
Acceptances

3,958
2,619
867

3,656
1,159
683

3,925
873
597

Australia
Overseas markets
Other liabilities

13,39854
13,611

13,492
88
14,113

14,556
152
19,63434,50733,191

39,737

226,751

178,654

167,205

Australia
New ZealandOverseas markets

153,927
57,55025,944

134,462
24,071
29,979123,341
21,50731,882Intragroup elimination

237,421(10,670)

188,512(9,858)

176,730(9,525)

226,751

178,654

167,205

15,0001,229

10,929
1,244

9,507
1,415

16,22912,173

10,922242,980

190,827

178,127

34.6%

29.2%

30.3%

Non-interest bearing liabilities

Total liabilities
Total average liabilities

Total average shareholders’ equity
Ordinary share capital1
Preference share capital

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

70 I financial report

NOTES TO THE FINANCIAL STATEMENTS
34: INTEREST SPREADS AND NET INTEREST AVERAGE MARGINS
2004
$m

2003
$m

2002
$m

3,450
1,400
433

3,210
699
425

3,009
601
432

5,283

4,334

4,042

138,991
55,92027,912(10,670)

118,688
23,942
29,382(9,858)103,346
21,30130,798(9,525)

212,153

162,154

145,920

%

%

%

6.79
7.20
3.27
6.67

6.48
7.43
3.30
6.31

6.36
7.17
3.79
6.21

Gross interest spread
Interest forgone on impaired assets3

2.11(0.02)

2.31(0.02)

2.44(0.04)Net interest spread
Interest attributable to net non-interest bearing items

2.09
0.39

2.29
0.41

2.40
0.51

Net interest average margin – Australia

2.48

2.70

2.91

Gross interest spread
Interest forgone on impaired assets3

2.08(0.01)

2.30
–

2.34
–

Net interest spread
Interest attributable to net non-interest bearing items

2.07
0.43

2.30
0.62

2.34
0.48

Net interest average margin – New Zealand

2.50

2.92

2.82

Gross interest spread
Interest forgone on impaired assets3

1.34(0.04)

1.37(0.07)

1.20(0.05)Net interest spread
Interest attributable to net non-interest bearing items

1.30
0.25

1.30
0.15

1.15
0.25

Net interest average margin – Overseas markets

1.55

1.45

1.40

Gross interest spread
Interest forgone on impaired assets3

2.08(0.02)

2.28(0.03)

2.31(0.04)Net interest spread
Interest attributable to net non-interest bearing items

2.06
0.43

2.25
0.42

2.27
0.50

Net interest average margin – Group

2.49

2.67

2.77

Net interest income1
Australia
New ZealandOverseas markets

Average interest earning assets
Australia
New ZealandOverseas markets
Intragroup elimination

2

Gross earnings rate
Australia
New ZealandOverseas markets
Group

Interest spreads and net interest average margins may be analysed as follows
Australia

New ZealandOverseas markets

Group

1 On a tax equivalent basis
2 Average interest rate received on interest earning assets. Overseas markets includes intragroup assets
3 Refer note 14 to the financial reportfinancial report I 71

NOTES TO THE FINANCIAL STATEMENTS
35: 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 the Group. Routine management of market risk is delegated to two senior management committees chaired by the Chief Financial
Officer. The Credit and Trading 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
for authorising the trading risk limit framework. The Group Asset and Liability Committee reviews balance sheet based risk measures andstrategies on a monthly basis.
The Value at Risk (VaR) Measure
A key measure of market risk is Value at Risk (VaR). VaR is a statistical estimate of the likely daily loss and is based on historical market
movements.
The confidence level is such that there is 97.5% or 99% probability that the loss will not exceed the VaR estimate on any given day.
The 99% confidence level encompasses a wider range of potential outcomes.
The Group's standard VaR approach for both traded and non-traded risk is historical simulation. The Group calculates VaR using historicalchanges in market rates and prices over the previous 500 business days.
It should be noted that because VaR is driven by actual historical observations, it is therefore not an estimate of the maximum loss that theGroup 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) and associated supplementary limits to measure and manage traded market risk.
Traded and non-traded market risks have been considered separately below.
Traded Market Risks
Trading activities are focused on customer trading, distribution and underwriting of a range of securities and derivative instruments.
The principal activities include foreign exchange, interest rate and 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 04$m

High for
period
Sep 04$m

Low forperiod
Sep 04$m

Average for
period
Sep 04$m

As at
Sep 03$m

High for
period
Sep 03$m

Low forperiod
Sep 03$m

Averageperiod
Sep 03$m

Foreign exchangeInterest rate
Diversification benefit

0.5
1.5
(0.7)

2.0
2.1
(1.6)

0.3
0.6
(0.1)

0.7
1.1
(0.4)

1.4
1.1
(0.8)

2.0
2.1
(1.5)

0.3
0.5
(0.1)

0.8
1.0
(0.5)

Total VaR

1.3

2.5

0.8

1.4

1.7

2.6

0.7

1.3

Foreign exchangeInterest rate
Diversification benefit

0.9
1.8
(0.9)

2.8
2.8
(2.2)

0.4
0.8
(0.2)

1.0
1.5
(0.6)

1.6
1.4
(0.8)

3.2
3.0
(2.6)

0.5
0.9
(0.4)

1.3
1.7
(0.9)

Total VaR

1.8

3.4

1.0

1.9

2.2

3.6

1.0

2.1

Value at risk at 97.5% confidence

Value at risk at 99% confidence

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 andInterest Rate/Debt Markets.

72 I financial report

NOTES TO THE FINANCIAL STATEMENTS
35: MARKET RISK (CONTINUED)
Non-Traded Market Risks (Balance Sheet Risk)
The principal objectives of balance sheet management are to manage interest income sensitivity while maintaining acceptable levels ofinterest rate and liquidity 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 investment of capital and other non-interest bearing liabilities in interest bearing assets. Interest raterisk is reported as follows using three measures: VaR, scenario analysis (to a 1% shock) and disclosure of the interest rate sensitivity gap(refer note 36).
a) VaR Interest Rate Risk
Below are aggregate VaR figures covering non-traded interest rate risk.

Value at risk at 97.5% confidence
Total ANZ GroupAs at
Sep 04$m

High for
period
Sep 04$m

Low forperiod
Sep 04$m

Average for
period
Sep 04$m

As at
Sep 03$m

High for
period
Sep 03
$m

21.0

37.2

21.0

29.5

24.4

59.3

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 theimmediate 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 apercentage of reported net interest income. The sign indicates the nature of the rate sensitivity with a positive number signifying that a rateincrease 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.
Consolidated
2003
2004

Impact of 1% Rate ShockAs at 30 September
Maximum exposure
Minimum exposure
Average exposure

1.48%
1.53%
(0.09)%
0.69%

1.67%
1.67%
(0.86)%
0.54%

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 aresult 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 theGroup's discretion), a profile based on historically observed and/or anticipated rate sensitivity is used. This treatment excludes the effect ofbasis risk between customer pricing and wholesale market pricing. For example, when wholesale market rates are anticipating an official rateincrease 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 separate 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 Groupto accurately quantify the interest rate risks associated with the balance sheet, and to formulate strategies to manage current andfuture risk profiles.

financial report I 73

NOTES TO THE FINANCIAL STATEMENTS
35: MARKET RISK (CONTINUED)
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 the Australian 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 is routinely monitored and hedging is conducted where it is likely to add shareholder value. Revenue related hedge contracts
outstanding at 30 September 2004 were USD 36 million and NZD 3,450 million.
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.

36: INTEREST SENSITIVITY GAP
The following table represents the interest rate sensitivity as at 30 September 2004 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 isbased upon historically observed and/or anticipated rate sensitivity.
Sensitivity to interest rates arises from mismatches in the period to repricing of assets and that of the corresponding liability funding. Thesemismatches are managed within policy guidelines for mismatch positions.

At 30 September 2004

BetweenBetweenLess than 3 months and 6 months and3 months
6 months
12 months$m$m$m

Between
1 year and5 years$m

After
5 years$m

Notbearing
interest
$m

Total
$m

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

8,030
8,326
147,883
383

788
1,261
8,415
134

508
1,538
12,914
127

823
1,667
36,740
607

6
293
673
5

989
139
(1,663)28,759

11,144
13,224204,962
30,015

Total assets

164,622

10,59815,087

39,837977

28,224259,345

Certificates of deposit and term deposits
Other deposits
Other borrowings and due to other financial institutions
Other liabilities
Bonds, notes and loan capital

54,24553,84327,733
127
18,738

7,596
843
2,784
151
2,474

4,574
1,648
2,844
186
962

4,199
4,997
1,805
749
9,955

7
–
7
166
3,948

–
7,927
854
28,058–70,621
69,25836,02729,43736,077

Total liabilities

154,686

13,848

10,21421,705

4,128

36,839241,420

–
6,655

–
3,114

–
(8,887)–(4,777)–
3,895

17,925–

17,925–

16,591
16,591(136)
16,455(4,014)
12,441

13,35525,796744
26,540(26,540)–––

Shareholders’ equity and outside equity interests
Off balance sheet items affecting interest rate sensitivity
Interest sensitivity gap– net– cumulative

The bulk of the Group’s loan/deposit business is conducted in the domestic balance sheets of Australia and New Zealand and is priced on a
floating rate basis. The mix of repricing maturities in these books is influenced by the underlying financial needs of customers.
Offshore operations, which are generally wholesale in nature, are able to minimise interest rate sensitivity through closely matching thematurity 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 is positioned to take advantage of the expected movement in interest rates. However, such positions are taken
within the overall risk limits specified by policy.

74 I financial report

NOTES TO THE FINANCIAL STATEMENTS
36: INTEREST SENSITIVITY GAP (CONTINUED)
The following table represents the interest rate sensitivity as at 30 September 2003 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 2003

BetweenBetweenLess than 3 months and 6 months and3 months
6 months
12 months$m$m$m

Between
1 year and5 years$m

After
5 years$m

Notbearing
interest
$m

Total
$m

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

6,857
4,452
117,209
640

388
890
6,796
61

103
1,231
7,201
92

47
2,059
18,804
828

36
291
466
58

1,588
57
(1,011)
26,4489,019
8,980
149,465
28,127

Total assets

129,158

8,135

8,627

21,738851

27,082

195,591

Certificates of deposit and term deposits
Other deposits
Other borrowings and due to other financial institutions
Other liabilities
Bonds, notes and loan capital

39,94543,002
20,408480
10,384

4,313
471
2,591
19
1,273

2,634
956
2,352
65
241

2,158
2,971
2,024
441
8,466

44
–
35
117
1,838

–
5,831
1,226
27,519–49,09453,231
28,63628,641
22,202

Total liabilities

114,219

8,667

6,248

16,0602,034

34,576

181,804–(4,818)–(111)–(1,214)

–
5,227

–
916

13,787–

13,787–

10,121
10,121

(643)
9,478

1,165
10,643

10,905
21,548(267)
21,281(21,281)–––

Shareholders’ equity and outside equity interests
Off balance sheet items affecting interest rate sensitivity
Interest sensitivity gap– net– cumulative

financial report I 75

NOTES TO THE FINANCIAL STATEMENTS
37: NET FAIR VALUE OF FINANCIAL INSTRUMENTS
Australian Accounting Standard AASB 1033: Presentation and Disclosure of Financial Instruments (AASB 1033) requires disclosure of the net
fair value of on and off balance sheet financial instruments. The disclosures exclude all non-financial instruments, such as income taxes andregulatory deposits, and specified financial instruments, such as interests in controlled entities. The aggregate net fair value amounts do not
represent the underlying value of the Group.
Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s
length transaction. Net fair value is the fair value adjusted for transaction costs.
Quoted market prices, where available, are adjusted for material transaction costs and used as the measure of net 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 majorityof short-term financial instruments, defined as those which reprice or mature in 90 days or less, with no significant change in credit risk, thenet fair value was assumed to equate 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 2004. While judgement is used in obtaining the net fair valueof financial instruments, there are inherent weaknesses in any estimation technique. Many of the estimates involve uncertainties andmatters of significant judgement, and changes in underlying assumptions could significantly affect these estimates. Furthermore, market
prices or rates of discount are not available for many of the financial instruments valued and surrogates have been used which may notreflect 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 2004, and therefore
the net fair value of the financial instruments subsequent to 30 September 2004 may be different from the amounts reported.
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

Net fair value
2004
2003
$m
$m

6,363
4,781
5,478
9,786
206,788
12,466
9,458

6,592
2,427
4,213
6,706
151,058
13,178
10,618Carrying value
2004
2003
$m
$m

6,363
4,781
5,478
9,706
204,962
12,466
9,088

6,592
2,427
4,213
6,581
149,465
13,1789,824

LIQUID ASSETS AND DUE FROM OTHER FINANCIAL INSTITUTIONS
The carrying values of these financial instruments are considered to approximate their net fair values as they are 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 for securities with similar credit risk, maturity and yield characteristics.

INVESTMENT SECURITIESNet fair value is based on quoted market prices or broker or dealer price quotations. If this information is not available, net fair value has
been estimated using quoted market prices for securities with similar credit, maturity and yield characteristics.

SHARES IN ASSOCIATES AND JOINT VENTURE ENTITIESNet fair value is based on quoted market prices or broker or dealer price quotations. If this information is not available net fair value has
been estimated using quoted market prices for securities with similar credit, maturity and yield characteristics, or by reference to the net
tangible asset backing of the investee.

76 I financial report

NOTES TO THE FINANCIAL STATEMENTS
37: NET FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
LOANS, ADVANCES AND CUSTOMERS’ LIABILITIES FOR ACCEPTANCESThe carrying value of loans, advances and acceptances is net of specific and general provisions for doubtful debts and income yet to mature.
The estimated net fair value of loans, advances and acceptances is based on the discounted amount of estimated future cash flows andaccordingly has not been adjusted for either specific or general provisions for doubtful debts.
Estimated contractual cash flows for performing loans are discounted at estimated current bank credit spreads to determine fair value.
For loans with doubt as to collection, expected cash flows (inclusive of the value of security) are discounted using a rate which includes
a premium for the uncertainty of the flows.
The difference between estimated net fair values of loans, advances and acceptances and carrying value reflects changes in interest rates
and the credit worthiness of borrowers since loan origination.
Net lease receivables, with a carrying value of $3,079 million (2003: $2,996 million) and a net fair value of $3,080 million(2003: $3,003 million), are included in loans and advances.

OTHER FINANCIAL ASSETS
Included in this category are accrued interest, fees receivable and derivative financial instruments. The carrying values of accrued interestand 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
2004
2003
$m
$m

Financial Liabilities

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

7,349
168,542
12,466
27,747
8,540
13,665

6,467
124,519
13,178
16,837
5,640
13,285Carrying value
2004
2003
$m
$m

7,349
168,557
12,466
27,602
8,475
13,525

6,467
124,494
13,178
16,572
5,630
13,062

DUE 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 BORROWINGSThe 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 demandat the reporting date. The fair value is not adjusted for any value expected to be derived from retaining the deposit for a future period of time.
For interest bearing fixed maturity deposits and other borrowings and acceptances without quoted market prices, market borrowing rates ofinterest 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 2004 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 theremaining term to maturity of the instrument was used.

OTHER FINANCIAL LIABILITIESThis 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 liabilities.

financial report I 77

NOTES TO THE
FINANCIAL STATEMENTS
37: NET FAIR VALUE OF FINANCIAL
INSTRUMENTS (CONTINUED)COMMITMENTS AND CONTINGENCIESAs outlined in note 48, the Group hasvarious 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 thecreditworthiness of counterparties sinceorigination of the commitments, theirestimated 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 notmaterial, and accordingly the fair values
shown above would not differ materiallyfrom fair values calculated in accordancewith SFAS 107.

38: DERIVATIVE FINANCIAL
INSTRUMENTS
DERIVATIVES
Derivative instruments are contracts
whose value is derived from one or more
underlying financial instruments orindices. They include swaps, forward rateagreements, futures, options andcombinations of these instruments.
The use of derivatives and their sale tocustomers 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 tofluctuations 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 aconsistent manner.

The principal exchange rate contracts
used by the Group are forward foreignexchange contracts, currency swaps andcurrency options. Forward foreignexchange contracts are agreements to buy
or sell a specified quantity of foreign
currency on a specified future date at anagreed rate. A currency swap generally
involves the exchange, or notional
exchange, of equivalent amounts of twocurrencies and a commitment to exchangeinterest periodically until the principal
amounts are re-exchanged on a futuredate. Currency options provide the buyer
with the right, but not the obligation,either to purchase or sell a fixed amountof a currency at a specified rate on or
before a future date. As compensation forassuming the option risk, the option
writer generally receives a premium at thestart of the option period.
The principal interest rate contracts usedby the Group are forward rate agreements,
interest rate futures, interest rate swaps
and options. Forward rate agreements arecontracts for the payment of the difference
between a specified interest rate and areference rate on a notional deposit at afuture settlement date. There is no
exchange of principal. An interest rate
future is an exchange traded contract forthe delivery of a standardised amount of a
fixed income security or time deposit at afuture date. Interest rate swap
transactions generally involve theexchange of fixed and floating interest
payment obligations without the exchangeof the underlying principal amounts.
Derivative transactions generate income
for the Group from buy/sell spreads andfrom trading positions taken by the Group.
Income from these transactions is taken to
net interest income, foreign exchangeearnings or profit on trading instruments.
Income or expense on derivatives enteredinto for balance sheet and revenue
hedging purposes is accrued and recorded
as an adjustment to the interest income or
expense of the related hedged item.

CREDIT RISKThe credit risk of derivative financial
instruments arises from the potential for acounterparty 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 thecost of replacing the contract in the eventof counterparty default. The Group limits
its credit risk within a conservative
framework by dealing with creditworthy
counterparties, setting credit limits on
exposures to counterparties, andobtaining 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 other than
trading contracts. Notional principal
amounts measure the amount of theunderlying physical or financial commodity
and represent the volume of outstandingtransactions. 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 withan allowance for the potential increase invalue over the remaining term of thetransaction should market
conditions change.
The fair value of a derivative represents
the aggregate net present value of the
cash inflows and outflows required toextinguish the rights and obligations
arising from the derivative in an orderly
market as at the reporting date. Fair value
does not indicate future gains or losses,
but rather the unrealised gains and losses
from marking to market all derivatives at aparticular point in time.

78 I financial report

NOTES TO THE FINANCIAL STATEMENTS
38: DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)

Consolidated

Notional
principal
amount2004$mCreditequivalentamount2004$m

Fair value
2004$m

Notional
principal
amount2003$mCreditequivalentamount2003$m

Fair value
2003$m183,825
51,437251
13,28818,852
2,686

3,216
3,095
n/a
398
n/a
436

(1,411)
(25)
2
224
(226)
115

144,687
42,528353
10,971
15,889
3,818

3,717
3,124
n/a
433
n/a
408

(683)
(121)
–
395
(451)
112

270,339

7,145(1,321)

218,246

7,682

(748)

39,572
321,585
38,27012,81015,214

9
3,682
n/a
111
n/a

5
424
4
64
(35)

47,617
236,083
13,458
11,961
13,987

10
3,232
n/a
117
n/a

11
487
3
61
(23)

427,451

3,802

462

323,106

3,359

539

11,743

3,381

31

8,520

2,836

73

709,533

14,328(828)

549,872

13,877(136)

Foreign exchange contracts
Spot and forward contracts
Swap agreements
Futures contracts1
Options purchased
Options sold2
Other contracts

Interest rate contracts
Forward rate agreements
Swap agreements
Futures contracts1
Options purchased
Options sold2

Credit contracts
Credit default swaps3

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 Credit default swaps include structured financing transactions that expose the Group to the performance of certain assets. The total investment of the Group in these transactions is USD 750 million(2003: USD 750 million)

financial report I 79

NOTES TO THE FINANCIAL STATEMENTS
38: 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 thederivatives held for trading and other than trading purposes.
Remaining life
Less than
1 year$m

1 to 5 years$mGreater than
5 years
$m

Total
$m

Trading$m

Other than
Trading$m

178,501
9,945
243
12,361
18,001
1,015

5,033
33,631
8
863
789
1,436

291
7,861
–
64
62
235

183,825
51,437251
13,28818,852
2,686

162,072
13,670251
13,28818,852
2,681

21,75337,767–––
5

220,066

41,7608,513

270,339

210,81459,52539,514
121,594
35,759
4,546
7,506

58
153,556
2,511
7,680
7,267

–
46,435–584
441

39,572
321,585
38,27012,81015,21431,437248,186
32,498
12,773
15,2148,135
73,3995,772
37–208,919

171,072

47,460427,451

340,108

87,343

1,310

9,472

961

11,743

8,775

2,968

Total

430,295

222,304

56,934

709,533

559,697

149,836

Consolidated
At 30 September 2003

Less than
1 year$m

1 to 5 years$mGreater than
5 years
$m

Total
$m

Trading$m

Other than
Trading$m

138,559
9,632
348
10,002
14,4751,379

5,677
24,616
5
792
1,228
2,258

451
8,280
–
177
186
181

144,687
42,528353
10,971
15,8893,818

130,825
17,763353
10,971
15,8893,808

13,862
24,765–––
10

174,395

34,576

9,275

218,246

179,609

38,63747,09094,922
13,114
5,407
13,987527
106,612
344
5,790
–

–
34,549–764–

47,617
236,083
13,458
11,961
13,98742,764
186,760
13,458
11,961
13,987

4,853
49,323–––

174,520

113,273

35,313

323,106

268,930

54,176

2,157

6,287

76

8,520

5,298

3,222

351,072

154,136

44,664

549,872

453,837

96,035

Consolidated
At 30 September 2004

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

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

Credit contracts
Credit default swaps

Remaining life

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

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

Credit contracts
Credit default swaps
Total

80 I financial report

NOTES TO THE FINANCIAL STATEMENTS
38: DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
Concentrations of credit risk exist for groups of counterparties when they have similar economic characteristics. Major concentrationsof 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.
Approximately 47% (2003: 54%) of the Group’s exposures are with counterparties which are either Australian banks or banks basedin other OECD countries.
Corporations,
non-OECD
banks andothers
$m

Total
$m

Consolidated
At 30 September 2004

OECD
governments$mAustralian
andOECD banks$mAustralia
New ZealandOverseas markets

147
12
2

5,258
1,228
212

6,534
839
96

11,939
2,079
310

161

6,698

7,469

14,328

Consolidated
At 30 September 2003

OECD
governments$mAustralian
andOECD banks$mCorporations,
non-OECD
banks andothers
$m

Total
$m

Australia
New ZealandOverseas markets

227
21
3

6,559
531
386

5,531
506
113

12,317
1,058
502

251

7,476

6,150

13,877

financial report I 81

NOTES TO THE FINANCIAL STATEMENTS
38: 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

Other than Trading
Fair value
Fair value
as at
as at
2004
2003
$m
$m

Fair value
as at
2004
$m

Trading
Fair value
as at
2003
$m

Fair value
Average2004$m

Trading
Fair value
Average2003$mForeign exchange contracts
Spot and forward contracts
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
Other contracts
Gross unrealised gains
Gross unrealised losses

875(2,392)628(2,509)

687
(581)

1,923
(725)

1,719
(927)

1,284
(794)

532
(430)

397
(283)

110
(237)

776
(1,011)

498
(254)

554
(672)

–
–
–
–

–
–
–
–

8
(6)
224
(226)

–
–
395
(451)

–
–
352
(337)

–
–
270
(326)

–
–

–
–

298
(183)

245
(133)

247
(111)

315
(136)

(1,415)(1,767)

94

1,019

1,187

495

–
–

–
–

8
(3)

13
(2)

6
(4)

7
(1)

467
(181)

402
(228)

1,825
(1,687)

1,843(1,530)2,127(1,790)1,885(1,561)

6
(4)
8
–

–
–
–
–

54
(52)
56
(35)

51
(48)
61
(23)

52
(43)
65
(36)

41
(37)
79
(58)

–
–

–
–

–
–

–
–

–
–

–
–

296

174

166

365

377

355

42
(6)

74
–

44
(49)

34
(35)

37
(42)

44
(69)

36

74

(5)

(1)

(5)

(25)

(1,083)(1,519)

255

1,383

1,559

825

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
Other contracts
Gross unrealised gains
Gross unrealised losses

Credit contracts
Credit default swaps
Gross unrealised gains
Gross unrealised losses

Total

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

82 I financial report

NOTES TO THE FINANCIAL STATEMENTS
38: DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)The Group classifies derivatives into two types according to the purpose they are entered into: trading or hedging.
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 capitaland to manage and control the sensitivity of the Group’s income while maintaining acceptable levels of interest rate and liquidity risk.
The Group also uses a variety of foreign exchange derivatives to hedge against adverse movements in the value of foreign currency
denominated assets and liabilities and future revenue streams.
Income and loss relating to trading derivatives is reported in the statement of financial performance as other operating income. The fairvalue of trading derivatives is recorded on a gross basis as other assets or other liabilities as appropriate unless there is a legal right of set
off. The fair value of a derivative financial instrument is the net present value of future expected cash flows arising from that instrument.
In order to be classified as a hedging derivative the hedging relationship must be expected to be effective. Hedging derivatives areaccounted for in the same manner as the underlying asset or liability they are hedging. For example, if the hedged instrument is accounted
for using the accrual method, the hedging instrument will also be accounted for using the accrual method.
During the year NZD2.4 billion hedge of NZD revenue were put in place to lock in historically high NZD exchange rates. Hedge contracts
outstanding at 30 September 2004 totalled NZD3.7 billion.
The table below shows the notional principal amount, credit equivalent amount and fair value of derivatives held by the Group, split between
those entered into for customer-related and trading purposes, and those entered into for balance sheet hedging and revenue related hedging.

Consolidated

Notional
principal
amount2004$mCreditequivalentamount
2004
$m

Fair
value
2004
$m

Notional
principal
amount2003$mCreditequivalentamount
2003
$m

Fair
value
2003
$m

210,81456,039
3,486

4,511
2,585
49

94
(1,371)(44)

179,60937,360
1,277

5,795
1,874
13

1,019
(1,857)
90

270,339

7,145(1,321)

218,246

7,682

(748)

340,108
87,343

3,163
639

166
296

268,930
54,176

2,931
428

365
174

427,451

3,802

462

323,106

3,359

539

8,775
2,968

745
2,636

(5)
36

5,298
3,222

427
2,409

(1)
74

11,743

3,381

31

8,520

2,836

73

709,533

14,328(828)

549,872

13,877(136)

Foreign exchange and commodity contracts
Customer-related and trading purposes
Balance sheet hedging purposes
Revenue related hedging

Interest rate contracts
Customer-related and trading purposes
Balance sheet hedging purposes

Credit contracts
Customer-related and trading purposes
Balance sheet hedging purposes

Total

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

Consolidated

Foreign Exchange
Contracts
2003
$m

2004
$m

Interest Rate and Credit
Contracts
2004
2003
$m
$m

Total
2004
$m

Total
2003
$m

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

(37)
(14)
–
–

47
26
14
–

71
127
40
(3)

214
86
117
(5)

34
113
40
(3)

261
112
131
(5)

(51)

87

235

412

184

499

financial report I 83

NOTES TO THE FINANCIAL STATEMENTS
39: SECURITISATION
During the year ended 30 September 2004, the Group securitised residential mortgage loans amounting to $1,481 million (2003: $nil).
All securitised 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 for servicing 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 the securitised loans are inadequate to service the obligations of the SPE except to the limited extent provided in the transaction
documents through the provision of arm’s 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 theGroup in any way stands behind the capital value 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 arm’s 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. The Group also provides hedging facilities to the SPEs to mitigate interest rate and currency risks. All thesetransactions are completed on an arm’s length basis.
The following table summarises the cash flows from the SPEs to the Group in respect of assets securitised by the Group.
2004
$m

2003
$m

1,481
4
7

–
4
13

20041
$m

Consolidated
2003
$m

20021
$m

Premium and related revenue
Investment revenue
Claims expense
Insurance policy liabilities expense

25
2
(8)
(4)

–
–
–
–

701
238
(636)
(204)

Life insurance margin on services operating income
Operating expenses

15
(3)

–
–

99
(54)

Profit before income tax
Income tax expense

12
–

–
–

45
(20)

Profit after income tax

12

–

25

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

12
(1)
1

–
–
–

18
(1)
8

Profit after income tax

12

–

25

Proceeds from securitising loans
Servicing fees received
Other cash inflows

40: LIFE INSURANCE

Reconciliation of Life Insurance margin on services operating income to profit after income tax:

Profit after income tax arose from:

1 Results for 2002 include the profits of ANZ Life Assurance Company Limited, which was sold into a joint venture with ING in April 2002. Results for 2004 include the profits of NBNZ Life Insurance
Limited, which was acquired as part of the purchase of NBNZ in December 2003

84 I financial report

NOTES TO THE FINANCIAL STATEMENTS
41: SEGMENT ANALYSIS
For management purposes the Group is organised into seven major business segments including Personal Banking Australia, Institutional,
New Zealand Business, Corporate Australia, Esanda and UDC, Asia Pacific and ING Australia. An expanded description of the principal
activities for each of the business segments is contained in the Glossary on pages 141 to 142.
A summarised description of each business segment is shown below:
Personal Banking Australia

Comprises the activities of Personal Distribution (including Rural Banking), Banking Products, Cards and Merchant Services
and Mortgages. Personal Distribution and Banking Products encompasses branches, call centres, on-line banking, as wellas financial advisory products and services. Mortgages provides mortgage finance serviced by residential real estate inAustralia and New Zealand. Cards and Merchant Services provides consumer and commercial credit cards, ePayment
products, personal loans, merchant payment facilities and automatic teller machines

Institutional

Comprises businesses that provide a full range of financial services to the Group’s largest corporate
and institutional customers

New Zealand Business

Provides a full range of banking services including wealth management and card services, for personal, small businessand corporate customers in New ZealandCorporate Australia

Comprises corporate banking, business banking and small business banking in Australia

Esanda and UDC

Provides vehicle and equipment finance and rental services. Operates in Australia as Esanda and Esanda FleetPartners
and in New Zealand as UDC and Esanda FleetPartners

Asia Pacific

Provides retail banking services in the Asia and Pacific regions, including ANZ’s share of PT Panin Bank in Indonesia

ING Australia

A joint venture between ANZ and ING Group provides integrated manufacture and distribution of wealth creation,
management and protection products and services aligned to ANZ distribution channels and the open market

As the composition of segments has changed over time, September 2003 comparatives have been adjusted to be consistent with the 2004
segment definitions. Comparatives for the year ended 30 September 2002 have not been provided because the data could not reasonably
be disaggregated into the changed segments.

BUSINESS SEGMENT ANALYSIS1, 2
Consolidated
30 September 2004

Personal
Banking
Australia$mInstitutional$m

New
ZealandBusiness$m

Corporate
Australia$mEsandaand UDC$m

Asia
Pacific$m

ING
Australia$m

Other3$m

Consolidated
Total
$m

External interest income
External interest expense
Net intersegment interest

5,818(1,313)(2,590)2,341(2,347)658

3,312(1,842)
(176)

903
(513)
248

1,060
(592)
(107)

165
(115)
100

–
(21)
(2)

518
(2,120)1,869

14,117(8,863)–

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

1,915
828

652
1,298

1,294
518

638
270

361
103

150
100

(23)
(22)

267
151

5,254
3,246

4
132

1
(24)

–
5

–
(98)

1
(10)

45
–

138
–

(44)
(5)

145
–

Operating income

2,879

1,927

1,817

810

455

295

93

369

8,645

Other external expenses
Net intersegment expenses(1,263)
(288)

(578)
(123)

(736)
(130)

(201)
(58)

(158)
(28)

(109)
(29)

2
(2)

(983)
658

(4,026)–

Operating expenses(1,551)

(701)

(866)

(259)

(186)

(138)

–

(325)

(4,026)Charge for doubtful debts
Income tax expense
Outside equity interests

(183)
(343)
–

(159)
(278)
(1)

(99)
(267)
(1)

(59)
(148)
–

(67)
(59)
–

(23)
(21)
(2)

–
15
–

(42)
(67)
–

(632)
(1,168)(4)

Profit after income tax

802

788

584

344

143

111

108

(65)

2,815

(112)
–

(20)
–

(49)
–

(6)
–

(25)
–

(8)
–

–
–

(89)
(146)

(309)
(146)

93,73814–

55,73669–

55,8702
43,011

18,992––

14,524
1
–

2,379
176
–

1,777
1,697
–

16,3291–

259,345
1,960
43,01140,03649,06047,275

21,397

12,261

4,924

416

66,051

241,420

Non-Cash Expenses
Depreciation
Amortisation of goodwill
Financial Position
Total external assets
Associate investments
Acquisition of NBNZ assets including
goodwill
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 Management, Group Financial Management and significant items

financial report I 85

NOTES TO THE FINANCIAL STATEMENTS
41: SEGMENT ANALYSIS (CONTINUED)
The following analysis details financial information by business segment.

BUSINESS SEGMENT ANALYSIS1, 2
Consolidated
30 September 2003

Personal
Banking
Australia$mInstitutional$m

New
ZealandBusiness$m

Corporate
Australia$mEsandaand UDC$m

Asia
Pacific$m

ING
Australia$m

Other3$m

Consolidated
Total
$m

External interest income
External interest expense
Net intersegment interest

4,625(1,044)(1,810)2,170(2,087)
620

1,060
(475)
(88)

734
(403)
243

1,005
(512)
(143)

167
(123)
96

–
(16)
–

454
(1,244)
1,082

10,215(5,904)–

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

1,771
701

703
1,242

497
254

574
251

350
86

140
94

(16)
(9)

292
83

4,311
2,702

–
121

3
(26)

–
5

–
(92)

–
(8)

55
–

99
–

(51)
–

106
–

Operating income

2,593

1,922

756

733

428

289

74

324

7,119

Other external expenses
Net intersegment expenses(1,144)
(295)

(551)
(124)

(280)
(122)

(180)
(54)

(155)
(24)

(111)
(31)

2
(2)

(809)
652

(3,228)–Operating expenses(1,439)

(675)

(402)

(234)

(179)

(142)

–

(157)

(3,228)Charge for doubtful debts
Income tax expense
Outside equity interests

(169)
(292)
–

(165)
(278)
(2)

(37)
(106)
–

(55)
(133)
–

(63)
(57)
–

(19)
(27)
(1)

–
8
–

(106)
(41)
–

(614)
(926)
(3)

Profit after income tax

693

802

211

311

129

100

82

20

2,348

Depreciation
Amortisation of goodwill
Financial Position

(85)
–

(17)
–

(16)
–

(2)
–

(16)
–

(8)
–

–
–

(103)
(18)

(247)
(18)

Total external assets
Associate investments
Total external liabilities

79,8291235,66056,97732
48,005

14,379–12,01615,993–
19,50813,4601
10,795

2,027
117
4,524

1,736
1,648
403

11,1904
50,893

195,591
1,814
181,804

Non-Cash Expenses

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 Management and Group Financial Management

The following analysis details financial information by geographic location.

GEOGRAPHIC SEGMENT ANALYSIS4, 5
Consolidated

$m

2004
%

$m

2003
%

$m

2002
%

11,767
4,632
1,109

67
27
6

9,508
2,149
1,366

73
17
10

8,697
1,917
1,393

72
16
12

17,508100

13,023100

12,007100

170,455
69,801
19,08966
27
7151,538
25,696
18,35777
13
10135,050
23,79924,25674
13
13

259,345100

195,591100

183,105

100

2,785
763
439

70
19
11

2,371
495
411

72
15
13

2,391
456
376

74
14
12

3,987

100

3,277

100

3,223

100

IncomeAustralia
New ZealandOverseas markets

Total assets
Australia
New Zealand6
Overseas markets

7

Net profit before tax
Australia
New ZealandOverseas markets

4
5
6
7

Intersegment transfers are accounted for and determined on an arm’s length or cost recovery basis
The geographic segments represent the locations in which the transaction was booked
2004 amount includes NBNZ assets, including goodwill acquired of $3.1 billion
Includes outside equity interests

86 I financial report

NOTES TO THE FINANCIAL STATEMENTS
42: NOTES TO THE STATEMENTS OF CASH FLOWS
2004$mConsolidated
2003$m

The Company
2004
2003
$m
$m

2002
$m

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

Net profit after income tax

Inflows(Outflows)

2,815

2,348

2,322

1,972

3,068

Provision for doubtful debts
Depreciation and amortisation
Provision for employee entitlements, restructuring and other provisions
Payments from provisions(Profit) loss on sale of premises and equipment
Provision for surplus lease space(Profit) on sale of controlled entities and associates
Recovery from NHB litigation
Profit on sale of investment securities
Unrealised (gain) loss on revaluation of treasury instruments
Net decrease (increase)

632
455
429
(395)
5
7
–
–
–
(169)

614
265
219
(349)
5
(11)
–
–
–
262

860
226
248
(436)
(5)
1
(170)
(248)
(4)
(282)

433
220
352
(390)
5
7
–
–
–
(535)

464
193
87
(248)
6
(1)
–
–
–
216

Trading securities
Interest receivable
Accrued income
Tax balances
Amortisation of discounts/premiums included in interest income
Net increase (decrease)

514
(478)
–
921
(27)

1,669
(189)
51
(386)
(19)

(1,030)
328
(16)
46
(30)

(1,147)
(326)
–
817
16

1,583
(144)
37
(447)
9

Interest payable
Accrued expenses
Other

605
75
(139)

180
69
(109)

(348)
(1)
(12)

377
(49)
(7)

184
228
14

Total adjustments

2,435

2,271

(873)

(227)

2,181

Net cash provided by operating activities

5,250

4,619

1,449

1,745

5,249

Adjustments to reconcile net profit after income tax to net cash
provided by operating activitiesb) Reconciliation of cash and cash equivalents1
Cash and cash equivalents include liquid assets and amounts due from other financial institutions with an original term to maturity of lessthan 90 days. Cash and cash equivalents at the end of the financial year as shown in the statements of cash flows are reconciled to therelated items in the statements of financial position as follows

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

2004
$m

Consolidated
2003
$m

2002
$m

The Company
2004
2003
$m
$m

4,998
2,856

5,509
1,806

4,821
3,104

2,408
1,834

2,834
1,577

7,854

7,315

7,925

4,242

4,411

1 At 30 September 2004, cash and cash equivalents totalling nil (2003: nil; 2002: nil) were not available for use outside the local operations due to exchange control regulations

financial report I 87

NOTES TO THE FINANCIAL STATEMENTS
42: NOTES TO THE STATEMENTS OF CASH FLOWS (CONTINUED)c) Acquisitions and disposals1
Values retranslated at 30 September 2004 exchange rates
2004$mConsolidated
2003
$m

2002
$m

Details of aggregate assets and liabilities of controlled entities and branches acquired, and disposed of,by the Group are as follows:
Fair value of net assets acquired
Liquid assets
Due from other financial institutions
Net loans and advances
Trading securities
Investment securities
Other assets
Premises and equipment
Due to other financial institutions
Payables and other liabilities
Deposits and other borrowings
Provisions
Unsubordinated debt
Loan capital

842
2,737
32,215
1,742
225
1,815
169
(1,151)(2,588)(32,352)(115)(1,179)
(514)

–
–
–
–
–
–
–
–
–
–
–
–
–

–
–
141
–
–
106
5
–
(7)
(231)
–
–
–

Fair value of net assets acquired
Goodwill on acquisition

1,846
3,266

–
–

14
53

Consideration paid
Cash consideration paid
Foreign currency translation

5,112
4,842
270

–
–
–

67
67
–

Liquid assets
Investment securities
Net loans and advances
Life insurance investment assets
Other assets
Premises and equipment
Deposits and other borrowings
Payables and other liabilities
Life insurance policy liabilities
Provisions

–
–
–
–
–
–
–
–
–
–

–
–
–
–
–
–
–
–
–
–

8
36
–
5,090
38
4
–
(22)
(4,798)36

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

–
–

–
–

392
174

Net consideration received/receivable

–

–

566

Cash consideration received

–

–

–

Fair value of net assets disposed

1 For details on acquisitions and disposals refer to note 18d) Non-cash financing and investing activities

Share capital issues
Dividend reinvestment plan

2004
$m

Consolidated
2003
$m

2002
$m

135

115

94

The Company
2004
2003
$m
$m

135

115

e) Financing arrangements
Consolidated
2004
Available$m

Unused$m

2003
Available$m

Unused$m

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

889

884

978

549

4,115

433

3,376

352

Total finance available

5,004

1,317

4,354

901

88 I financial report

NOTES TO THE FINANCIAL STATEMENTS
43: CONTROLLED ENTITIESAll controlled entities are 100% owned unless otherwise noted.
The material controlled entities of the Group are:Amerika Samoa Bank Inc*ANZ Capel Court Limited
ANZ Capital Funding Pty Ltd
ANZ Capital Hedging Pty Ltd
ANZCOVER Insurance Pty Ltd
ANZ (Delware) Inc*ANZ Executors & Trustee Company Limited
ANZ Financial Products Pty Ltd
ANZ Funds Pty Ltd
ANZ Bank (Europe) Limited*
ANZ Bank (Samoa) Limited*
ANZ Holdings (New Zealand) Limited*
ANZ National Bank Limited*
ANZ National (Int’l) Limited*
Arawata Finance Limited*
Burnley Investments Limited*
Whitelaw Investments*
Gold Liquid Investments Limited*
Arawata Holdings Limited*
Harcourt Corporation Limited*
Airlie Investments Limited*
Nerine Finance No. 2*1
Endeavour Finance Limited*
Tui Endeavour Limited*
NBNZ Holdings Ltd*NBNZ Life Insurance Limited*
Tui Securities Limited*
CNZ Investment Trust*
UDC Finance Limited*
Truck Leasing Limited*
ANZ International (Hong Kong) Limited*
ANZ Asia Limited*
ANZ Bank (Vanuatu) Limited*
ANZ International Private Limited*
ANZ Singapore Limited*Bank of Kiribati Ltd*1
LFD Limited
Minerva Holdings Limited*
ANZEF Limited*
Norway Funds Limited*
ANZ Investment Holdings Pty Ltd
530 Collins Street Property Trust
ANZ Lenders Mortgage Insurance Pty Limited
ANZ Orchard Investments Pty Ltd
ANZ Rural Products Pty Ltd
Australia and New Zealand Banking Group (PNG) Limited*
Esanda Finance Corporation Limited
Fleet Partners Pty Limited
NMRSB Pty Ltd
PT ANZ Panin Bank*1
Upspring Limited*

Incorporated in

Nature of BusinessAmerika Samoa
Australia
Australia
Australia
Australia
USA
Australia
Australia
Australia
EnglandSamoa
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
Cayman Islands
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New ZealandHong Kong
Hong Kong
VanuatuSingapore
Singapore
Kiribati
Australia
EnglandEngland
New ZealandAustralia
Australia
Australia
Australia
Australia
Papua New Guinea
Australia
Australia
Australia
Indonesia
England

Banking
Investment Banking
Funding
Hedging
Self-Insurance
Finance
Trustee/Nominee
Investment
Holding Company
Banking
Banking
Holding Company
Banking
FinanceFinance
Investment
Investment
Investment
Holding Company
Investment
Investment
FinanceFinanceFinance
Holding Company
Insurance
Investment
Investment
Finance
Leasing
Holding Company
Banking
Banking
Finance
Merchant Banking
Banking
Holding Company
Holding Company
Export FinanceFunding
Investment
Investment Activities
Mortgage Insurance
Investment
Investment
Banking
General Finance
Finance
Investment
Banking
Investment* Audited by overseas KPMG firms
1 Outside equity interests hold ordinary shares or units in the controlled entities listed above as follows: Bank of Kiribati - 150,000 $1 ordinary shares (25%) (2003 : 150,000 $1 ordinary shares 25%);
PT ANZ Panin Bank – 7,500 IDR 1M shares (15%) (2003: 7,500 IDR 1M shares (15%); Nerine Finance No. 2 - 340,000,000 $1 redeemable preference shares (40%)

financial report I 89

NOTES TO THE FINANCIAL STATEMENTS
44: ASSOCIATES
Significant associates of the Group are as follows:

PT Panin Indonesia Bank1
Metrobank Card Corporation Inc2
ETrade3
Autobake Pty Ltd4
Australian Convenience Foods Pty Ltd5
Other associates

Ownership
Interest
held

VotingInterest

Incorporated Carrying Value6
in
$m

29%
40%
35%
43%
46%

29%
40%
35%
20%
20%

Indonesia
Indonesia
Australia
Australia
Australia

Total shares in associates
1
2
3
4
5
6

160
16
14
7
9
57

Reportingdate

Principal
activity

31 December
31 December
30 June30 June30 JuneBanking
Cards Issuing
Online Stockbroking
Manufacturing
Manufacturing

263

An associate from 1 April 2001. In 2004 the Group exercised options over a further 18% of PT Panin Indonesia Bank
An associate from 9 October 2003
An associate from 1 October 2002
An associate from 21 August 2002
An associate from 1 July 2002
2003 carrying values as follows: PT Panin Indonesia Bank $117 million, ETrade $12 million, Australian Convenience Foods Pty Ltd $7 million, Autobake Pty Ltd $8 million and Other associates $22
million. Total $166 million

45: INTERESTS IN JOINT VENTURE ENTITIESThe Group has an interest in a joint venture entity as follows:

ING Australia Limited1

Interest2
held

Voting2
Interest

Incorporated Carrying Value
in
$m

49%

49%

Australia

1,697

Reportingdate

Principal
activity

31 December

Funds
Management
and Insurance

1 A joint venture entity from 1 May 2002
2 This represents the Group's 49% share of the assets and liabilities of ING Australia Limited. The Group has joint control of the joint venture, therefore we do not consolidate this entity.
Key details of the joint venture are:
> ING Australia Limited is owned 51% by ING Group and 49% by the Group.
> Both shareholders have an equal say in strategic decisions with a number of matters requiring the approval of both Shareholders (ie require unanimous approval).
These include major items of capital expenditure, acquisitions or disposals in excess of $20 million and changes to the Board structure.
> Equal board representation with four Group nominees and four ING Group nominees. All key issues (including business plans, major capital expenditure, acquisitions etc)
require unanimous Board approval.
> Refer to Critical Accounting Policies item f) for details regarding valuation of investment in ING Australia Limited.
The Joint Venture includes the majority of the Group's and ING's funds management and insurance activities in Australia and New Zealand.

90 I financial report

NOTES TO THE FINANCIAL STATEMENTS
45: INTERESTS IN JOINT VENTURE ENTITIES (CONTINUED)
2004
$m

2003
$m

57
116

2
57

Carrying amount at the commencementof the period
Share of net profit
Completion accounts adjustment
Dividend received

1,648
97
(10)
(38)

1,593
55
–
–

Carrying amount at the end of the financial year

1,697

1,648

Investments
Other assets

10,301
768

9,659
663

Total assets

11,06910,322

Policy holder liabilities
Other liabilities

9,565
375

8,928
324

Total liabilities

9,940

9,252

Net assets

1,129

1,070

Revenues
Expenses

386
(220)

310
(197)

Profit from ordinary activities before income tax

166

113

Income tax expense

(28)

(14)

Profit from ordinary activities after income tax

138

99

Amortisation of notional goodwill

(41)

(44)

Net equity accounted profit

97

55

173
16

169
23

189

192

73

77

Retained profits attributable to the joint venture entity
At the beginning of the financial year
At the end of the financial year
Movement in the carrying amount of the joint venture entity

1

Share of assets and liabilities

Share of revenues, expenses and results

Share of commitments
Lease commitments
Other commitments
Total expenditure commitments
2

Share of contingent liabilities

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
2 This represents Deeds of Subordination with ASIC and buyer of last resort

financial report I 91

NOTES TO THE FINANCIAL STATEMENTS
46: FIDUCIARY ACTIVITIESThe Group conducts investment fiduciary activities for trusts, including deceased estates. These trusts have not been consolidated as theCompany does not have direct or indirect control.
Where the Company or its controlled entities incur liabilities in respect of these operations as trustee, where the primary obligation isincurred in an agency capacity as trustee of the trust rather than on the Group's own account, a right of indemnity exists against the assets of
the applicable 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:

Trusteeships

2004
$m

2003
$m

1,632

1,432

Funds management activities are conducted through the ANZ/INGA joint venture and ANZ National Bank Limited. As at 30 September 2004,
the ANZ/INGA joint venture had funds under management of $30,679 million (2003: $28,655 million) whilst ANZ National Bank Limited had
funds under management of $1,495 million.

47: COMMITMENTS
Consolidated
2004
2003
$m
$m

The Company
2004
2003
$m
$m

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

60
–

55
1

20
–

11
1

Total capital expenditure commitments

60

56

20

12

201
495
442

164
391
441

135
336
405

134
320
425

1,138

996

876

879

13
19

17
23

7
12

12
20

32

40

19

32

Total lease rental commitments

1,170

1,036

895

911

Total commitments

1,230

1,092

915

923

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

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

The Group leases land and buildings under operating leases expiring from one to five years. Leases generally provide the Group with a rightof renewal at which time all terms are renegotiated. Lease payments comprise a base amount plus an incremental contingent rental.
Contingent rentals are based on either movements in the Consumer Price Index or operating criteria. Contingent rentals are not included inlease rental commitments, are not provisioned for due to their immateriality, therefore are expensed as incurred.

92 I financial report

NOTES TO THE FINANCIAL STATEMENTS
48: CONTINGENT LIABILITIES, CONTINGENT ASSET 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.

Undrawn facilities
Underwriting facilities

Consolidated
2004
2003
Contract
Contract
amountamount$m$m

The Company
2004
2003
Contract
Contract
amountamount$m$m

Controlled Entities
2004
2003
Contract
Contract
amountamount$m$m

78,851
63

65,381
15

62,118–57,91415

16,733
63

7,467–

78,91465,396

62,11857,92916,796

7,467

CONTINGENT LIABILITIESThe qualitative details of the estimated maximum amount of contingent liabilities that may become payable relate to non-customer
contingent liabilities. These contingent liabilities relate to transactions that the Group has entered into as principal. By contrast, thequantitative tabular presentation relates to customer contingent liabilities, ie direct credit substitutes and trade and performance related
items. Hence, as the contingent liabilities refer to different aspects of Group operations, there are no reconciling items.
The Group guarantees the performance of customers by issuing standby letters of credit and guarantees to third parties. The risk involved isessentially the same as the credit risk involved in extending loan facilities to customers, therefore these transactions are subjected to thesame credit origination, portfolio management and collateral requirements for customers applying for loans. As the facilities may expire
without being drawn upon, the notional amounts 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 beentaken to be the contract amount.
Consolidated
2004
2003
Contract
Contract
amountamount$m$m

The Company
2004
2003
Contract
Contract
amountamount$m$m

Controlled Entities
2004
2003
Contract
Contract
amountamount$m$m

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

5,065
2,636
1,057
168
2,262
9,625
1,336

4,954
2,409
1,406
148
1,755
9,027
854

4,923
2,636
1,036
168
2,045
9,352
931

4,888
2,409
1,387
148
1,637
8,815
601

142
–
21
–
217
273
405

66
–
19
–
118
212
253

Total contingent liabilities

22,14920,55321,091

19,885

1,058

668

The details and estimated maximum amount of contingent liabilities that may become payable are set out below.
i) Clearing and Settlement Obligations
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, the Consumer Electronic Clearing System and the High Value Clearing System (HVCS), the Company has a commitment torules which could result in a bilateral exposure and loss in the event of a failure to settle by a member institution; 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.

financial report I 93

NOTES TO THE
FINANCIAL STATEMENTS
48: CONTINGENT LIABILITIES,CONTINGENT ASSET AND CREDIT
RELATED COMMITMENTS (CONTINUED)
For both the APCA HVCS and Austraclear,
the obligation arises only in limited
circumstances.
ii) Nominee Activities
The Group will indemnify each customerof controlled entities engaged in nominee
activities against loss suffered by reasonof such entities failing to perform any
obligation undertaken by them to acustomer.
iii) Interbank Deposit Agreement
ANZ has entered into an Interbank Deposit
Agreement with the major banks in thepayments system. This agreement is apayment system support facility certified
by the Australian Prudential Regulation
Authority, where the terms are such that if
any bank is experiencing liquidity
problems, the other participants are
required to deposit equal amounts of up
to $2 billion for a period of 30 days. At theend of 30 days the deposit holder has theoption to repay the deposit in cash or by
way of assignment of mortgages to thevalue of the deposit.
iv) Tax Audit
The Group in Australia is being auditedby the Australian Taxation Office (ATO) as
part of normal ATO procedures. The Grouphas received various assessments that are
being disputed and may receive further
assessments.
At the Company’s request the ATO isreviewing the taxation treatment of thesale of Grindlays in 2000.
During the year, the Company and the
ATO settled the dispute over the taxation
treatment of lease assignments
undertaken in 1991 and 1992. The
settlement was within existing provisions.
The Group in New Zealand is being
audited by local revenue authorities aspart of normal revenue authority
procedures, with a particular focus on
certain kinds of structured financetransactions. On 30 September 2004, theGroup in New Zealand received Notices of
Proposed Adjustment (the 'Notice') inrespect of one of these structured financetransactions undertaken in the 2000
financial year. The Notice is formal advice
that the New Zealand Inland Revenue

Department (IRD) is proposing to amend
tax assessments. The Notice is not a tax
assessment and does not establish a tax
liability, but it is the first step in a formal
dispute process. Should the same
position be adopted by the IRD on theremaining transactions of that kind, themaximum potential tax liability would beapproximately NZD348 million (includinginterest tax effected) for the period to
30 September 2004. Of that maximum
potential liability, approximately
NZD116 million is subject to tax
indemnities provided by Lloyds TSB Bank
PLC under the agreement by which ANZ
acquired the National Bank of New
Zealand and which relate to transactions
undertaken by National Bank of New
Zealand before December 2003.
Based on external advice, the Group has
assessed the likely progress of these andother issues, and believes that it holds
appropriate provisions.
v) Sale of Grindlays businesses
On July 31, 2000, ANZ completed the saleto Standard Chartered Bank ("SCB") of ANZ
Grindlays Bank Limited and the privatebanking business of ANZ in the United
Kingdom and Jersey, together with ANZ
Grindlays (Jersey) Holdings Limited and its
subsidiaries, for USD1.3 billion in cash.
ANZ provided warranties and certain
indemnities relating to those businesses
and, where it anticipated that payments
would be likely under the warranties orindemnities, made provisions to cover the
anticipated liability. The issues below
have not impacted our reported results.
All settlements and costs have been
covered within the provisions establishedat the time. ANZ remains liable in relation
to the Foreign Exchange Regulation Act
and differential cheques mattersdescribed below.
National Housing Bank
In 1992, Grindlays received a claim
aggregating approximately Indian Rupees
5.06 billion from the National Housing
Bank ("NHB") in India. The claim aroseout of cheques drawn by NHB in favourof Grindlays, the proceeds of whichwere credited to the account of a
Grindlays customer.
Grindlays won an arbitration award in
March 1997, under which NHB paid
Grindlays an award of Indian Rupees
9.12 billion. NHB subsequently won an
appeal to the special court of Mumbai,
after which Grindlays filed an appeal with
the Supreme Court of India. While thatappeal was pending, the parties settled
the matter, with Grindlays receiving Indian

Rupees 6.20 billion of disputed monies
that Grindlays had lodged with the Court,
and NHB receiving the balance.
ANZ in turn received a payment of
USD124 million from Standard Chartered
Bank under the terms of the Indian
Indemnity, and is separately pursuing a$130 million claim against its insurers in
respect of the loss Grindlays suffered in
the dispute. ANZ's claim against its
insurers is being litigated in the VictorianSupreme Court, with a trial unlikely to beheld until early 2006. No amounts
receivable under this action have beenrecognised in these accounts.

94 I financial report

NOTES TO THE FINANCIAL STATEMENTS
48: CONTINGENT LIABILITIES, CONTINGENT ASSET AND CREDIT RELATED COMMITMENTS (CONTINUED)
FERA
In 1991, certain amounts were transferred from non-convertible Indian Rupee accounts maintained with Grindlays in India. Thesetransactions may not have complied with the provisions of the Foreign Exchange Regulation Act, 1973. Grindlays, on its own initiative,
brought these transactions to the attention of the Reserve Bank of India. The Indian authorities have served notices on Grindlays and certainof its officers in India that could lead to possible penalties. Grindlays has commenced proceedings in the courts contesting the validity ofthese notices.
Differential Cheques
In June 2003, Grindlays was successful in its appeal against orders to repay, with interest, two payments it received from a stockbroker in1991 in connection with securities transactions. These orders had directed repayment of Indian Rupees 24 million (plus interest accruing at
24% since 1991). Since the appeal decision was handed down, no further action has been taken against Grindlays in relation to a further
twelve proceedings received by it in 1991 in similar circumstances totalling Indian Rupees 277 million.
In addition, ANZ provided an indemnity relating to tax liabilities of Grindlays (and its subsidiaries) and the Jersey Sub-Group to the extent towhich such liabilities were not provided for in the Grindlays accounts as at 31 July 2000. A claim has been made under this indemnity also,with no material impact on the Group expected.
vi) Pursuant to class order 98/1418 (as amended) 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 individual financial statements. The results of thesecompanies are included in the consolidated Group results. The entities to which relief was granted are:
> ANZ Properties (Australia) Pty Ltd1
> Alliance Holdings Pty Ltd1
> ANZ Capital Hedging Pty Ltd1
> ANZ Funds Pty Ltd1
> ANZ Infrastructure Investments Ltd3
> ANZ Nominees Ltd1
> ANZ Securities (Holdings) Ltd312
3
4

Relief granted on 21 August 2001
Relief granted on 13 August 2002
Relief granted on 9 September 2003
Revocation Deed on 24 June 2004

> Deori Pty Ltd4
> E S & A Holdings Pty Ltd1
> Jikk Pty Ltd1
> LFD Ltd4
> NMRSB Pty Ltd4
> ANZ Orchard Investments Pty Ltd2
> Votraint No. 1103 Pty Ltd2
> Binnstone Traders Pty Ltd4

financial report I 95

NOTES TO THE FINANCIAL STATEMENTS
48: CONTINGENT LIABILITIES, CONTINGENT ASSET 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 Deedof Cross Guarantee under the class order was lodged and approved by the Australian Securities and Investments Commission. The effect of
the Deed is that the Company guarantees to each creditor payment in full 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 notbeen 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
2004
2003
$m
$m

Profit before tax
Income tax expense

3,017
(771)

2,595
(643)

Profit after income tax
Retained profits at start of year 1

2,246
6,100

1,952
4,788

Total available for appropriation
Ordinary share dividends provided for or paid
Transfer from reserves

8,346(1,598)
224

6,740
(640)
–

Retained profits at end of year

6,972

6,100

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

3,747
6,107
134,566
35,806
1,114

3,919
3,818
116,557
38,916
1,178

Total assets

181,340

164,388

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

99,811
1,551
62,713618

90,186766
59,353614

Total liabilities

164,693

150,919

16,647

13,46916,647

13,469AssetsLiabilities

Net assets
2

Shareholders’ equity

1 The Companies included in the class order changed in 2003, accordingly retained profits did not carry forward in 2003
2 Shareholders' equity excludes retained profits and reserves of controlled entities within the class ordervii) The Company has guaranteed payment on maturity of the principal and accrued interest of commercial paper notes issued by
ANZ (Delaware) Inc. of $7,068 million as at 30 September 2004 (2003: $6,988 million).
viii) The Company is party to an underpinning agreement with ANZ National Bank Limited whereby the Company undertakes to assume riskin relation to credit facilities extended by ANZ National Bank Limited to individual customers which exceed 35% of ANZ National Bank
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.

GENERAL
There 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 as deemed necessary have been made.

96 I financial report

NOTES TO THE FINANCIAL STATEMENTS
48: CONTINGENT LIABILITIES, CONTINGENT ASSET AND CREDIT RELATED COMMITMENTS (CONTINUED)
CONTINGENT ASSET
On 14 October 2003 ANZ issued proceedings in the Victorian Supreme Court against its captive insurance company ANZcover Insurance Pty
Ltd (ANZcover) regarding its insurance claim consequent upon settlement of its former subsidiary ANZ Grindlays Bank Limited’s 1992 disputewith India’s National Housing Bank (NHB). ANZcover is an authorised general insurer restricted to insuring the interests of ANZ and its
subsidiaries. ANZcover in turn purchases reinsurance from global reinsurers, primarily in the London reinsurance market. ANZcover has no
retained exposure to the NHB claim which is fully re-insured save for a small exposure arising from the insolvency of some re-insurers in the
London market.
The January 2002 settlement of the NHB litigation saw Grindlays recover Rupees 6.20 billion ($248 million at 19 January 2002 rates) of the
disputed monies that Grindlays Bank had lodged with the Court, which by that time totalled Rupees 16.45 billion ($661 million at
19 January 2002 rates), including interest, with NHB receiving the balance. ANZ in turn received a payment of USD124 million from Standard
Chartered Bank under the terms of the Indian Indemnity. The claim of $130 million (plus compound interest) is for the balance of the limit ofindemnity under ANZcover’s reinsurance arrangements for the 1991–92 policy year. The proceedings remain on foot.

49: SUPERANNUATION COMMITMENTS
A number of pension and superannuation schemes have been established by the Group worldwide. The Group may be obliged to contributeto the schemes as a consequence of legislation and provisions of trust deeds. Legal enforceability is dependent on the terms of thelegislation and trust deeds. The major schemes with assets in excess of $25 million are:Contribution levels
Country

SchemeScheme type

Australia

ANZ Australian Staff
Superannuation Scheme1,2

Defined Contribution Scheme
Section C3
orDefined Contribution Scheme
Section A
orDefined Benefit Scheme
Pension Section4

New Zealand

ANZGROUP (New Zealand)
Staff Superannuation Scheme1,2

National Bank Staff
Superannuation Fund1,2
England1

ANZ UK Staff Pension Scheme

Defined Benefit Scheme5orDefined Contribution Scheme
Defined Benefit Scheme6orDefined Contribution Scheme

Employee

Employer

optional7

Balance of cost9

optional

9% of salary10

nil

Balance of costnil

Balance of cost11

2.5% min
5.0% of salary

7.5% of salary12
Balance of cost13

2.0% min

11.2% of salary8

Balance of cost14

Defined Benefit Scheme

5.0%

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 Closed to new members in 1997
4 Closed to new members. Operates to make pension payments to retirees who were members or to dependants of the members
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 or to dependants of the members
6 Closed to new members on 1 October 1991
7 Optional but with minimum of 1%
8 From 1 October 2003, members of the Senior Management section, commenced contributions at the rate of 5% of salary, and all new members at the rate of 5% of salary
9 As determined by the Scheme Trustee on the recommendation of the actuary, currently 9% (2003: 9%) of members’ salaries
10 2003: 9% of salary
11 As recommended by the actuary, currently nil (2003: nil)
12 2003: 7.5% of salary
13 As recommended by the actuary, currently 20.7% of member’s salaries
14 The Group recommenced contributions to the Scheme, effective from 1 October 2003. Contributions are currently 25% of pensionable salaries. Additional half yearly contributions of GBP 500,000
for 15 years will commence, with the first payment to be made in November 2004

financial report I 97

NOTES TO THE FINANCIAL STATEMENTS
49: SUPERANNUATION COMMITMENTS (CONTINUED)
The details of defined benefit schemes are as follows:
Excess of
Net market
net market
value of value of assets
assets held over accruedby scheme
benefits$m$m

Employer’s
contribution$mAccruedbenefits$m

ANZ Australian Staff Superannuation Scheme
Pension Section1
ANZ UK Staff Pension Scheme1
ANZ Group (New Zealand) Staff Superannuation Scheme2
National Bank Staff Superannuation Fund3,6
Other

–
84
–
3
1

41
869
6
175
3

35
844
6
164
4

(6)
(25)
–
(11)
1

41
844
6
179
7

Totals

12

1,094

1,053

(41)

1,077

Excess of
Net market
net market
value of value of assets
assets held over accruedby scheme
benefits$m$m

Vestedbenefits$m

2004
Schemes

2003
SchemesANZ Australian Staff Superannuation Scheme
Pension Section5
ANZ UK Staff Pension Scheme5
ANZ Group (New Zealand) Staff Superannuation Scheme5
National Bank Staff Superannuation Fund6
Other
Totals123456Vestedbenefits$m

Employer’s
contribution$mAccruedbenefits
$m

–
–4
–
n/a
1

43
872
6
n/a
3

37
771
6
n/a
4

(6)
(101)
–
n/a
1

43
845
6
n/a
7

1

924

818

(106)

901

Amounts were measured at 31 December 2003
Amounts were measured at 30 June 2004
Amounts were measured at 30 September 2004
Represents employer contributions from the period 1 October 2003 to 30 September 2004 (nil in the prior year)
Amounts were measured at 31 December 2002
This scheme arises from the acquisition of the National Bank of New Zealand effective on 1 December 2003

ANZ Australian Staff Superannuation Scheme Pension Section
The pension section of the ANZ Australian Staff Superannuation Scheme is closed to new members. The last full actuarial valuation,
conducted by the actuary Towers Perrin (now Russell Employee Benefits), as at 31 December 2001 showed a small surplus. An interim
valuation conducted as at 31 December 2003 showed a deficit of $6 million and the expectation is that this has remained materiallyunchanged since that date. The Group has no present liability under the Scheme's trust deed to commence contributions or fund the deficit.
A full actuarial valuation is due to be conducted as at 31 December 2004 at which time the funding position will be re-assessed.

98 I financial report

NOTES TO THE
FINANCIAL STATEMENTS
49: SUPERANNUATIONCOMMITMENTS (CONTINUED)
National Bank Staff Superannuation FundThe last full actuarial valuation of thepension section of the National Bank Staff
Superannuation Fund was conducted by
Aon Consulting NZ as at 31 March 2004,
and showed a deficit of NZD6 million($6 million). An interim valuation
conducted as at 30 September 2004shows a deficit of NZD12 million($11 million). The Group has no present
liability under the Scheme's trust deed tofund the deficit, however it does have acontingent liability if the Scheme waswound up. Under the Scheme's trust deed
the Group is required to pay the Trusteesof the Scheme an amount sufficient toensure members do not suffer a reduction
in benefits to which they would otherwise
be entitled, as a result of a wind upof the Scheme.
The Group took actuarial advice at
31 March 2004 and has taken action
to fund the deficit by contributing
20.7% of salary.

ANZ UK Staff Pension Scheme
The deficit disclosed above has been
determined for the purpose of AASB1028"Employee Benefits".
Consulting actuaries Watson Wyatt LLP
have advised that as at 31 December 2003,
the Scheme would have met the minimum
funding requirement test (MFR) as definedin the UK legislation, being 115% fundedon that basis.
The Group has no present liability under
the Scheme's trust deed to fund the
deficit, however it does have a contingent
liability if the Scheme was wound up.
If this were to happen, the Trustee would
be able to pursue the Bank for additional
contributions under the UK Employer Debt
regulations. This is calculated based on
an insurance buy-out of the Scheme.
This is considered unlikely, given theGroup intends to continue the Schemeon an on-going basis and the financial
strength of the Group.
From 1 October 2003, the Group
recommenced contributions at the rate of
25% of pensionable salaries. These
contributions are sufficient to cover thecost of accruing benefits. In order toaddress the deficit, the Group has agreed
to pay half yearly additional contributionsof GBP 500,000 for a period of 15 years,
commencing for the year beginning
1 October 2004, with the first payment
being made in November 2004.

50: EMPLOYEE SHAREAND OPTION PLANS
The Company has four share purchaseand option incentive plans available for
employees and directors of the Group:
the ANZ Employee Share Acquisition
Plan1; the ANZ Employee Share Save
Scheme; the ANZ Share Option Plan; andthe ANZ Directors' Share Plan.
Shareholders of the Company haveapproved 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, other than in respect ofvoting rights.
Each option granted under the ANZ Share
Option Plan entitles a holder to purchaseone ordinary share subject to any terms
and conditions imposed on issue.
The exercise price of the options,determined in accordance with the rulesof the plan, is based on the weighted
average price of the Company's shares
traded during the five business days
preceding the date of granting the options.
An offer to employees and directors
cannot be made under any of the plans if
an issue pursuant to that offer will resultin the aggregate of shares issued andoptions granted over unissued shares
held for employees under various
employee share and option incentive
schemes exceeding 7% of the issued
capital (and unexercised options)of the Company.
The closing market price of one ordinary
share at 30 September 2004 was $19.02.
1 The ANZ Employee Share Acquisition Plan includes the$1,000 Share Plan and the Deferred Share Plan

financial report I 99

NOTES TO THE FINANCIAL STATEMENTS
50: EMPLOYEE SHARE AND OPTION PLANS (CONTINUED)ANZ EMPLOYEE SHARE ACQUISITION PLAN
$1,000 Share Plan
Subject to Board approval this plan allows for the issue of up to $1,000 of shares to all eligible employees each financial year.
Refer to section C7 of the Remuneration Report for more details.
The shares are issued for no consideration. During the financial year, 1,244,654 shares with an average issue price of $18.04 were issued
under the $1,000 Share Plan (2003: 1,028,623 shares with an average issue price of $17.70 were issued). These shares are issued from the
Share Capital account, hence only an increase in the number of shares on issue results.
Details of the movement in employee shares under the $1,000 Share Plan are as follows:
The Company
2004

2003

Number of shares at beginning of the year
Number of shares issued to the trust
Number of shares distributed to employees
Number of shares forfeited

4,537,676
1,512,886(787,873)(33,437)

4,217,660
1,242,614(915,612)(6,986)

Number of shares at end of the year

5,229,252

4,537,676
The Company

1

Number of shares acquired since commencement of the $1,000 Share Plan

2004

2003

8,258,575

7,013,921

1 Excludes shares issued under the bonus option plan and the dividend reinvestment plan

Deferred Share Plan
Selected employees may also be issued deferred shares, which vest in the employee up to three years from the date of issue. Ordinary
shares issued under this plan may be held in trust for up to 10 years, and may be required to meet performance hurdles before being able tobe traded after the restriction period has expired. The issue price is based on the volume weighted average price of the shares traded on the
ASX in the weeks leading up to and including the date of issue. Unvested shares are forfeited on resignation or dismissal, or if a
performance condition has not been met. Refer to sections C5.1 and C5.2 of the Remuneration Report for more details.
During the financial year, 2,750,277 (2003: 2,587,091) deferred shares were issued under this Plan.
Details of the movement in employee shares under the Deferred Share Plan are as follows:
The Company
2004

2003

Number of shares at beginning of the year
Number of shares issued to the trust
Number of shares distributed to employees
Number of shares forfeited

8,020,848
2,851,886(2,034,234)(122,604)

7,500,351
2,666,291(2,024,878)(120,916)

Number of shares at end of the year

8,715,896

8,020,848
The Company

1

Number of shares acquired since commencement of the Deferred Share Plan
1 Excludes shares issued under the bonus option plan and the dividend reinvestment plan

2004

2003

16,628,462

13,878,185

100 I financial report

NOTES TO THE FINANCIAL STATEMENTS
50: EMPLOYEE SHARE AND OPTION PLANS (CONTINUED)ANZ EMPLOYEE SHARE SAVE SCHEME
Eligible employees have the opportunity to request that a proportion of their income be directed to the purchase of ANZ shares. The amountthey elect to contribute is deducted fortnightly and shares are purchased on market quarterly in arrears by the trust. The Company
contributes 5% of the purchase price and pays for brokers fees and stamp duty. Senior executives may participate but are not eligible toreceive the 5% discount. Employees are eligible to participate in the Scheme if they are permanent full-time or part-time employees of theCompany and have been employed since 1 October immediately prior to the invitation being made by the Company. Employees nominate a
restriction period between 1 to 10 years during which period the shares are held in trust. Dividends are paid to the employees.
Details of the movement in employee shares under the ANZ Employee Share Save Scheme are as follows:
The Company
2004

2003

Number of shares at beginning of the year
Number of shares purchased
Number of shares issued to the trust
Number of shares distributed to employees

394,405
279,723
24,243(246,241)302,410291,210
16,408(215,623)

Number of shares at end of the year

452,130

394,405
The Company

Number of shares acquired since commencement of the ANZ Employee Share Save Scheme

2004

2003

1,043,375

763,652

Costs associated with the ANZ Employee Share Save Scheme were recognised in Personnel Expenses and Liquid Assets(amounts were less than $500,000).

ANZ SHARE PURCHASE SCHEME
The ANZ Share Purchase Scheme is a closed scheme. Shares have been progressively paid up by eligible officers, with the last remaining
shares held under the scheme fully paid up and redeemed during the year. No fully paid ordinary shares have been issued under thisScheme since 1996.
Details of the movement in employee shares under the ANZ Share Purchase Scheme are as follows:
The Company

Number of shares at beginning of the year
Number of shares redeemed by employees1
Number of shares at end of the year
1 Redeemed once paid out by employee

2004

2003

229,500(229,500)

1,272,500(1,043,000)–

229,500

financial report I 101

NOTES TO THE FINANCIAL STATEMENTS
50: EMPLOYEE SHARE AND OPTION PLANS (CONTINUED)ANZ SHARE OPTION PLAN
Selected employees may be granted options, which entitle them to purchase ordinary fully paid shares in the Company at or greater than aprice fixed at the time when the options are issued (depending on whether the exercise price is indexed or not). Voting and dividend rights
will be attached to the unissued ordinary shares when the options have been exercised.
Details of the options over unissued ordinary shares as at the beginning and end of the financial year and movements during the year
are set out below.

Grant date

Exercise
price$

Earliest
exercisedate

11/12/1998
25/03/1999
02/06/1999
02/06/1999
23/02/2000
08/03/2000
23/05/2000
26/09/2000
21/11/2000
27/12/2000
31/12/2000
27/01/2001
21/02/2001
27/02/2001
24/04/2001
24/04/2001
07/05/2001
01/06/2001
23/08/2001
27/08/2001
24/10/2001
24/10/2001
24/10/2001
24/10/2001
31/12/2001
31/12/2001
28/02/2002
24/04/2002
24/04/2002
24/04/2002
24/04/2002
31/05/2002
27/06/2002
21/07/2002
23/10/2002
23/10/2002
20/11/2002
31/12/2002
20/05/2003
20/05/2003
09/06/2003
05/11/2003
05/11/2003
31/12/2003
11/05/2004
11/05/2004
11/05/2004

9.62
10.72
10.48
10.48
9.39
9.48
11.09
12.03
13.62
13.91
14.06
13.91
14.20
14.75
12.98
12.98
12.98
14.61
15.77
16.09
16.33
16.33
0.00
16.33
16.48
16.80
17.49
18.03
0.00
18.03
18.03
18.55
18.55
17.18
17.34
17.34
17.56
16.69
17.60
17.60
18.12
17.55
17.55
17.48
0.00
18.22
18.22

11/12/2001
25/03/2002
02/06/2002
02/06/2002
23/02/2003
08/03/2003
23/05/2003
26/09/2003
22/11/2003
25/10/2003
31/12/2003
07/02/2004
21/02/2004
27/02/2004
25/04/2004
25/04/2004
07/05/2004
01/06/2004
21/08/2004
27/08/2004
25/10/2004
25/10/2004
24/10/2002
24/10/2004
31/12/2004
31/12/2003
26/02/2005
24/04/2005
24/04/2003
24/04/2005
24/04/2005
14/05/2005
28/06/2005
22/07/2005
23/10/2005
23/10/2005
20/11/2005
31/12/2004
20/05/2006
20/05/2006
09/06/2006
05/11/2006
05/11/2006
31/12/2005
11/05/2004
11/05/2007
11/05/2007

TotalsNo. options outstandingat 30 September 2004

Options
grantedOptions
lapsedandsurrendered

Options
exercised

On issue

VestedHurdle15,00022,000
325,000
115,000
442,000
350,000
271,250
57,5002,043,258
1,472,500
750,000
921,000
4,063,825
75,000934,900
2,271,415
176,900
414,250
76,00075,750870,200
3,101,925
409
50,000500,000
500,000
20,0003,183,849
4,705
885,193415,000
145,000
286,470
17,0002,584,352
2,265,111
40,0001,000,000
2,890,631
2,139,491
10,000
–
–
–
–
–
–

–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,796,256
1,322,863
1,000,000
11,9672,751,348
1,664,836–––
10,000–350,000–––
36,750–34,50072,050––62,325(650)
17,500
–
8,250
5,100
156,200–––––
226,063(5,243)
19,393
10,000–20,035–295,825
131,293––291,150
107,372–
136,938
60,922––60,92834,01615,00022,000
325,000
105,000
295,000–
107,500
27,5001,338,039
441,028750,000
214,700
1,020,207
50,000403,600
540,563
73,45086,750–4,500
111,800
134,125
409––––
77,145
9,948
105,299
25,000–
4,625––
13,053
–
–
2,241
4,423
–
1,076
66,276–
11,967
–
585

–
–
–
–
147,000–
163,750
30,000705,219994,722–
671,800
2,971,568
25,000531,300
1,668,527
104,100
310,000
76,00063,000753,300
2,811,600–
50,000500,000
500,000
20,0002,880,641–
760,501
380,000
145,000
261,810
17,0002,288,527
2,120,765
40,0001,000,000
2,597,240
2,027,696
10,0002,658,242
1,195,665
1,000,000–
2,690,420
1,630,235

Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
No
Yes
No
No
Yes
No
No
Yes
No
No
No
No
No
No
No
No
No
No
No
No
No
No
No
Yes
No
No

A
A
A
N
B
B
N
N
B
N
E
N
N
B
B
N
N
N
B
N
B
N
N
B
E
F
B
N
N
C
C
N
N
C
D
N
D
F
D
N
N
N
C
F
N
N
C

35,781,884

9,547,270

2,140,717

6,387,809

36,800,628

Expirydate

No. options
at beginningof the year

10/12/2003
24/03/2004
01/06/2004
01/06/2004
22/02/2007
07/03/2007
23/05/2007
25/09/2007
21/11/2007
07/02/2008
31/12/2004
07/02/2008
20/02/2008
26/02/2008
24/04/2008
24/04/2008
06/05/2008
31/05/2008
20/08/2008
26/08/2008
24/10/2008
24/10/2008
24/10/2003
23/10/2008
31/12/2005
31/12/2007
25/02/2009
24/04/2009
24/04/2004
24/04/2009
24/04/2009
13/05/2009
27/06/2009
21/07/2009
22/10/2009
22/10/2009
19/11/2009
31/12/2007
19/05/2010
19/05/2010
08/06/2010
04/11/2010
04/11/2010
31/12/2008
10/05/2006
10/05/2011
10/05/2011

The aggregate fair value of shares issued as a result of the exercise of options during the 2004 financial year was $116 million.

102 I financial report

NOTES TO THE FINANCIAL STATEMENTS
50: EMPLOYEE SHARE AND OPTION PLANS (CONTINUED)
On 24 October 2003 the Company issued a prospectus to invite shareholders to participate in a pro-rata renounceable rights issue.
In accordance with the rules set out in the ANZ Share Option Plan in the event of a rights issue, the exercise price of options granted under
the plan is to be reduced in accordance with ASX Listing Rule 6.22. As a result the exercise price of each option issued under the ANZ Share
Option Plan is reduced by 72 cents from the amount previously disclosed.
Details of performance hurdles applicable to options are as follows:
N No performance hurdles apply. Once the exercise period has been reached, the options may be exercised. These options are only granted
to high-potential employees below executive level. As their purpose is predominately retention and to share in any growth in the shareprice, additional hurdles are not applied. These types of options will not be granted after November 2004.
A During the two year period commencing three years and ending five years after the date of issue of the options, the percentage change of
the ANZ Total Shareholder Return (ANZ TSR) to exceed the percentage change of the S&P/ASX 200 Banks (Industry Group) Accumulation
Index from date of issue to any time from the third anniversary date up to and including the proposed exercise date.
B & C During the four-year period commencing three years, and ending seven years, after the issue date of the options:> 50% of the options allocated may be exercised by the option holder subject to the ANZ TSR exceeding the percentage change in the
S&P/ASX 200 Banks (Industry Group) Accumulation Index measured over the same period and calculated as at the last trading day of any
month; and> 50% of the options allocated may be exercised by the option holder subject to the ANZ TSR exceeding the percentage change in the
S&P/ASX 100 Accumulation Index measured over the same period and calculated as at the last trading day of any month.
D Options may be exercised during the four-year period commencing three years, and ending seven years, after the issue date of theoptions. The exercise price will be set according to the movement in the S&P/ASX 200 Banks (Industry Group) Accumulation Index(excluding ANZ) since issue date, and can be no lower than the base issue price.
E The options may be exercised only if the ANZ Accumulation Index over the period from the date on which the options are granted to thelast trading day of any month occurring during the relevant exercise period, equals or exceeds the, S&P/ASX 100 Accumulation Index
calculated over the same period (applicable to the CEO only).
F One half of the options may be exercised only if the ANZ TSR calculated over the period commencing on the date of grant and ending on
the last day of any month after the second anniversary of their date of grant exceeds the percentage change in the S&P/ASX 200 Banks(Industry Group) Accumulation Index over that same period; and the other half of the options may be exercised only if the ANZ TSR
calculated over the relevant period exceeds the percentage change in the S&P/ASX 100 Accumulation Index over that same period(applicable to the CEO only).
These options will expire immediately on termination of employment, except in the event of retirement, retrenchment, death or disablement
or where agreed by the directors of the Company, in which case the exercise of the options may be allowed.
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 thoseshares as if the options had been exercised prior to that issue. Those shares will be allotted to the option holder when the options are exercised.

financial report I 103

NOTES TO THE FINANCIAL STATEMENTS
50: EMPLOYEE SHARE AND OPTION PLANS (CONTINUED)
The following options were exercised by employees and former employees during the financial year:
Exercise price$No. of shares issued

Proceeds received$

Exercise price$No. of shares issued

Proceeds received
$

0.00
0.00
0.00
9.39
9.62
10.11
10.48
10.48
10.72
11.09
11.20
11.81
12.03
12.75
12.98
12.98
12.98
13.62
13.70
13.70
13.91
13.91
14.06
14.20

409
9,948
11,967100,000
15,000
195,000
90,000
325,000
22,00085,00015,00022,50025,0002,500
73,450400,400
530,3131,330,039
3,200
10,250210,200
358,278
750,000
999,207

0.00
0.00
0.00
939,000
144,300
1,971,450
943,200
3,406,000
235,840
942,650
168,000
265,725
300,750
31,875
953,381
5,197,192
6,883,462
18,115,131
43,840140,425
2,923,882
4,983,646
10,545,000
14,188,739

14.34
14.61
14.63
14.63
14.75
14.92
15.33
16.09
16.33
16.33
17.05
17.05
17.34
17.55
17.55
17.60
18.03
18.03
18.03
18.06
18.22
18.55
18.59

8,000
83,7504,500
82,75050,00021,0003,000
4,500
108,600
121,725
3,200
12,40012,768
1,076
66,276
4,423
25,00077,145105,299
285
585
4,625
2,241

114,720
1,223,587
65,835
1,210,632
737,500
313,320
45,99072,405
1,773,438
1,987,769
54,560211,420
221,397
18,883
1,163,143
77,844450,750
1,390,924
1,898,540
5,147
10,65885,793
41,660For those options exercised by employees and former employees during the financial year, the market price of the Company’s shares during
the year were as follows:High$19.44Low$15.94As at 30 September 2004

$19.02

104 I financial report

NOTES TO THE FINANCIAL STATEMENTS
50: EMPLOYEE SHARE AND OPTION PLANS (CONTINUED)
As at the date of the Directors’ Report, unexercised options over ordinary shares are as per the table on the previous page, adjusted for the
exercise of the following options which were exercised by employees and former employees since the end of the financial year.
Exercise price$No. of shares issued

Proceeds received$

Exercise price$No. of shares issued

Proceeds received
$

9.39
11.09
12.03
12.98
12.98
12.98
13.62
13.91
13.91
14.20
14.61

10,00015,000884
158,700
96,1258,250
9,000
47,24231,500153,750
9,250

93,900166,350
10,6352,059,926
1,247,703
107,085
122,580
657,136
438,165
2,183,250
135,143

16.09
16.33
16.33
17.34
17.55
17.60
18.03
18.22
18.22
18.94
19.30

2,250
174,800
234,600
2,031
1,214
1,547
2,536
230
323
6,183
8,458

36,2032,854,484
3,831,018
35,21821,30627,22745,724
4,191
5,885
117,106
163,239

Amounts received from exercising options under the ANZ Share Option Plan during the financial year were recognised as follows:
The Company
2004
2003
$m
$m

Share capital
Liquid assets

86
86

73
73

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.
Refer to section B3 of the Remuneration Report for more details.
Details of the movement in shares under this Scheme are as follows:
The Company1
2003
2004

Number of shares at beginning of the year
Number of shares purchased
Number of shares soldNumber of shares forfeited

464,467
197,655––

349,767
114,700––

Number of shares at end of the year

662,122464,467

1 Includes deferred shares

51: DIRECTORS AND SPECIFIED EXECUTIVES REMUNERATION AND SHARE AND OPTION DISCLOSURESThe remuneration and share and options details concerning the Directors of the Company and AASB 1046
“Director and Executive Disclosures by Disclosing Entities” specified executives of the Group are detailed on pages 6 to 23.

financial report I 105

NOTES TO THE FINANCIAL STATEMENTS
52: DIRECTORS AND SPECIFIED EXECUTIVES - RELATED PARTY TRANSACTIONSThis note covers the related party transactions (excluding share and options transactions) of the directors of the Company and AASB1046“Director and Executive Disclosures by Disclosing Entities” specified executives, as identified on pages 6 and 8.
Australian Securities and Investments Commission (ASIC) Class Order 98/110 dated 10 July 1998 (as amended)
The directors and specified executives have been exempted, subject to certain conditions, by an ASIC class order, 98/110 dated 10 July
1998 (as amended), from making disclosures of loans regularly made, guaranteed or secured directly or indirectly by the Group to relatedparties or in respect of a financial instrument transaction regularly made by the Group to related parties (other than shares and shareoptions), other than to the director or specified executive, or to an entity controlled or significantly influenced by the director or specified
executive, 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 or specified executive should reasonably beaware that, if not disclosed, would have the potential to adversely affect the decisions made by users of the financial statements about theallocation 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 theCompany has systems of internal controls and procedures which:i) in the case of any material financial instrument transaction, ensure that; andii) in any other case, are designed to provide a reasonable degree of assurance that, any financial instrument transaction of a bank which
may be required to be disclosed in the Company’s financial statements and which is not entered into regularly, is drawn to the attentionof the directors.

SHARES AND SHARE OPTIONS TRANSACTIONS
The aggregate of and movement during the financial year of shares and share options relating to the directors and specified executives andtheir personally related parties are detailed on pages 20 to 23.
Directors and specified executives receive normal dividends on these shares.

LOAN TRANSACTIONS
Details regarding loans outstanding at the reporting date to directors and specified executives including personally related parties (subject to
the ASIC Class Order 98/110 (as amended) disclosure limitation as described above), where the individuals aggregate loan balanceexceeded $100,000 at any time in the reporting period, are as follows:
Balance
1 October 2003

Balance
30 September 2004

Interest paid andpayable in thereporting period

Highest balancein the reporting period

$

$

$

$

3,500,000
13,154,657
18,342,500–
17,695,111
18,342,000

170,734
632,052
1,369,075

3,500,000
21,062,375
18,342,500

24,981

10,349,429

245,507

14,033,903

688,542
1,709,927
9,495,000

680,000
2,645,581
14,303,423

8322
149,6322
618,611

722,500
4,222,927
14,303,423

Directors
Non-executive Directors
C B GoodeJ C Dahlsen
D M Gonski
Executive Directors
J McFarlane1
Specified executives
E Funke Kupper
B C Hartzer
P Hawkins

1 The loan balances as at 30 September 2004 principally relate to loans for the purchase of ANZ shares, including the exercise of options
2 Interest payments were reduced as a result of a linked offset account106 I financial report

NOTES TO THE FINANCIAL STATEMENTS
52: DIRECTORS AND SPECIFIED EXECUTIVES - RELATED PARTY TRANSACTIONS (CONTINUED)
Details regarding the aggregate of loans made, guaranteed or secured by any entity in the Group to each group of directors and specified
executives including related parties (subject to the ASIC Class Order 98/110 (as amended) disclosure limitation as described above)
are as follows:
Balance
1 October 2003

Balance
30 September 2004

Interest paid andpayable in thereporting period

$

$

$

2004
Specified executives

35,022,138

46,386,540

2,417,368

4

2004

11,897,647

17,725,828

771,443

4

Number in group at
30 September

Directors

Loans made to the non-executive directors are made in the course of ordinary business on normal commercial terms and conditions. Loansto the executive director are made pursuant to the Executive Directors’ Loan Scheme authorised by shareholders on 18 January 1982, on thesame terms and conditions applicable to other employees within the Group in accordance with established policy.
No amounts have been written down or recorded as allowances, as the balances are considered fully collectible.

OTHER TRANSACTIONS OF DIRECTORS AND SPECIFIED EXECUTIVES
Other transactions (other than shares and share options)
Under the ASIC class order referred to above, disclosure of other transactions regularly made by the Group is limited to disclosure of suchtransactions with a director of the Company, specified executives of the Group and to an entity controlled or significantly influenced by the
directors and specified executives, on the basis the transactions are:- on arm’s length terms and conditions no more favourable than those entered into by other employees or unrelated customers;- information about them does not have the potential to affect adversely decisions about the allocations of scarce resources made by usersof the financial report, or the discharge of accountability by the director or specified executive; and- are deemed trivial or domestic in nature.
Transactions between the directors, specified executives and related entities and the Group during the financial year were in the nature of
normal personal banking, debentures, investment and deposit transactions. These transactions occurred on an arm’s length basis and on
normal commercial terms and conditions no more favourable than those given to other employees or customers and were trivial anddomestic in nature.

financial report I 107

NOTES TO THE FINANCIAL STATEMENTS
53: DIRECTORS OF CONTROLLED ENTITIES OF THE COMPANY - RELATED PARTY TRANSACTIONS1LOAN TRANSACTIONS
Loans to executive directors of controlled entities are made pursuant to the Executive Directors’ Loan Scheme authorised by shareholders on
18 January 1982. These loans were in the nature of normal personal loans and were made on the same terms and conditions applicable toother eligible employees within the Group in accordance with established policy.

OTHER TRANSACTIONS OF DIRECTORS AND PERSONALLY RELATED ENTITIESi) Financial instrument transactions
ASIC class order 98/110 dated 10 July 1998 (as amended)
Disclosure of financial instrument transactions regularly made by a bank is limited to disclosure of such transactions with a director of thecontrolled entity concerned or an entity controlled or significantly influenced by the director of the controlled entity.
Financial instrument transactions between the directors of the controlled entities or their personally related entities and the Bank during thefinancial 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 than those given to other employees or customers.
ii) Transactions other than financial instrument transactions of banks
All other transactions with directors of the controlled entities of the Company and their personally related entities are conducted on arm’s
length terms and conditions, and are deemed trivial or domestic in nature. These transactions are in the nature of deposits, debentures,or investment transactions conducted with non-bank controlled entities.
All other transactions with directors’ personally related entities occur within a normal customer or supplier relationship and are on arm’s
length terms and conditions.
1 Relates to all other related party disclosures not concerning directors of Australia and New Zealand Banking Group Limited as disclosed in note 52

54: TRANSACTIONS WITH ASSOCIATES AND JOINT VENTURE ENTITIES - RELATED PARTY DISCLOSURES
During the course of the financial year the Company and the Group conducted transactions with associates and joint venture entities on
normal commercial terms and conditions as shown below:
Consolidated
2004
2003
$’000
$’000

The Company
2004
2003
$’000
$’000

Aggregate
Amounts receivable from associates and joint venture entities
Interest revenue
Dividend revenue
Commissions received from ING Australia joint venture
Costs recovered from ING Australia joint venture

101,835
4,078
38,35387,026
9,776

30,691
1,126
5,606
79,14615,802

27,5532,422
365
80,127
9,761

1,139
507
326
70,504
15,544

108 I financial report

NOTES TO THE FINANCIAL STATEMENTS
55: US GAAP RECONCILIATIONThe consolidated financial statements of the Group are prepared in accordance with Generally Accepted Accounting Principles applicable inAustralia (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.
2004
$m

2003
$m

2002
$m

2,815

2,348

2,322

(xix)

(43)

(21)

(40)

(i)

2

2

2

(i)

12

2

5

(iii)
(ii)

(10)
189

(4)
62

(9)
(6)

(iii)
(vi)
(xv)
(xvii)(xx)(vi)(xviii)(xxiv)

26
(5)
(89)
(14)
(64)
(11)
(23)
(37)
40

25
2
(47)
–
(1)
–
–
–
12

25
18
(17)
(205)
–
–
–
–
2

2,788

2,380

2,097

155
149

144
144

127
126

2,788

2,380

2,097

(xiii)

233

(356)

(98)

(ix)

7

(2)

3

(xv)
(vi)

(94)
(14)

76
(99)

60
–

2,920

1,999

2,062

3
(3)
2
27
7
4

1
(2)
(1)
14
–
–

2
(1)
6
(5)
–
–

40

12

2

Note

Net profit reported under Australian GAAP
Items having the effect of increasing (decreasing) net income according
to US GAAP (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
Deferred profit on sale and leaseback transactions
over the lease term
Amortisation of goodwill
Amortisation of sale and leaseback gain
over the lease term
Pension expense adjustment
Mark to market and non compliant derivative hedges (under SFAS133)
Adjustment on entering joint venture
Interest on reclassified preference shares and amortisation of costs
Pension plan deficit amortisation
Guarantee fee obligation
Acquisition cost of NBNZ adjustment
Total tax impact of the above adjustments (refer below)
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 hedges after tax: Tax is(Sep 2004: $9m; Sep 2003: $54m; Sep 2002: $43m)
Unrealised profit (loss) on available for sale securities net of tax: Tax is(Sep 2004: $3m; Sep 2003: -$1m; Sep 2002: $1m)
Mark to market of cash flow hedges net of tax: Tax is:(Sep 2004: $-40m; Sep 2003: $33m; Sep 2002: $26m)
Pension plan deficit net of tax: Tax is: (Sep 2004: $-6m; Sep 2003: $-42m)
Total comprehensive income according to US GAAP
Total tax impact of the above adjustments comprises(Gain)/loss on assets sold and leased backAmortisation of deferred profit
Pension expense adjustment
Marked to market of non-compliant derivative hedges
Guarantee revenue
Pension plan deficit amortisation* Rounded to the nearest whole cent and restated for rights issue

financial report I 109

NOTES TO THE FINANCIAL STATEMENTS
55: US GAAP RECONCILIATION (CONTINUED)
Note

Shareholders’ equity reported under Australian GAAP1
Elimination of gross asset revaluation reserves
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
Pension expense adjustment
Derivatives and hedging activities
Adjustment on entering joint venture
Reclassification of preference shares
Guarantee fee obligation
Acquisition cost of NBNZ purchase adjustment
Total tax impact of the above adjustments (refer below)

(i)
(ix)
(i)
(ii)
(ii)
(iii)
(iv)
(vi)
(xv)
(xvii)(xx)(xviii)(xxiv)

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
Issue Costs
Adjustment to carrying value of the ING Australia joint venture
Consolidation of variable interest entities
Guarantee receivable
NBNZ goodwill due to acquisition cost adjustment
Total assets according to US GAAP

(i)
(ix)
(i)
(ii)
(ii)
(vi)
(v)
(xv)
(xx)
(xvii)(xii)(xviii)(xxiv)

2004
$m

2003
$m

2002
$m

17,907
(224)
8
52
695
(263)
(20)
–
(48)
69
(217)
(990)
(16)
(37)
1

13,770
(247)
1
50
695
(452)
(17)
–
(14)
309
(203)
(988)
–
–
(84)

11,448
(266)
3
48
695
(514)
(20)
681
126
247
(203)
–
–
–
(106)

16,917

12,82012,139259,345
(191)
12
52
695
(263)
58
(672)
192
10
(217)
3,036
4
(37)

195,591
(203)
2
50
695
(452)
66
(726)
397
13
(203)
–
–
–

183,105
(205)
3
48
695
(514)
67
(462)
501
–
(203)
–
–
–

262,024

195,230

183,035

6
14
(19)

5
4
(93)

6
(38)
(74)

1

(84)

(106)

1 Excluding outside equity

Total tax impact of the above adjustments comprises
Deferred profit on sale and leaseback transactions
Pension expense adjustment
Derivative and hedging activities

110 I financial report

NOTES TO THE
FINANCIAL STATEMENTS
55: US GAAP RECONCILIATION(CONTINUED)i) Premises and equipment
In accordance with Australian GAAP, theGroup holds its properties at a deemed
cost value (refer note 1xiv). However inthe past the Group at various times, hasrevalued properties, increasing the bookvalue of these assets. Any increments onrevaluation were credited directly to the
Asset Revaluation Reserve (ARR), anddecrements were debited to the ARR
to the extent of any previous
revaluation increments.
Decrements in excess of any previous
revaluation increments were charged tothe statement of financial performance.
The ARR forms part of Shareholders’equity and is not available for future
property writedowns while properties aremeasured at deemed cost.
Under US GAAP, revaluation of properties
is not permitted except for decrements
which are regarded as other than
temporary. Any such decrements arerecorded in the statement of financial
performance. Subsequent recoveries tothe statement of financial 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 onrevalued assets sold have been adjusted
to historical cost in the US GAAP
reconciliation.
ii) Goodwill
Under Australian GAAP the Group changed
its accounting policy in respect of goodwill
in the financial year ended
30 September 1993 so that goodwill isamortised over a period not exceeding
20 years. Previously, goodwill on
acquisition was charged in full to theGroup’s statement of financial performancein the year of acquisition.
Historically, under US GAAP, goodwill has
been capitalised and amortised over theperiod of time during which the benefits
are expected to arise, such period notexceeding 20 years. Until 1 October 2002,
adjustments were made in the US GAAP
reconciliation statement to restore

goodwill written-off in full under Australian
GAAP and to amortise such goodwill overthe period of the expected benefits. As at
1 October 2002, ANZ adopted SFAS 142“Goodwill and Other Intangible Assets”.
Under US GAAP for goodwill acquired
during the year ended 30 September 2002
and for all goodwill balances after
30 September 2002 a review for
impairment test will apply rather thansystematic goodwill amortisation.
This review is undertaken in accordancewith SFAS 142 ‘Goodwill and Other
Intangible Assets.’ Goodwill acquired isallocated to reporting segments that are
expected to benefit from the acquisition.
These units have been evaluated using a
combination of discounted cashflows andmultiples of earnings methodologies. Any
impairment is recognised in earnings in
the year in which it is identified. The 2004
review did not indicate any impairment.
For comparability the table below
reconciles the Group’s US GAAP reported
income to ‘adjusted’ income excluding
the effect of goodwill amortisation.
2002

US GAAP reported
net income
Goodwill amortisation
Reported net income
excluding effect ofamortisation
Basic EPS using
adjusted net income
Diluted EPS using
adjusted net incomev) Income taxes
Under Australian GAAP, tax benefits
relating to carry forward tax losses mustbe ‘virtually certain’ of being realised
before being booked. Realisations ofbenefits 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 nomaterial adjustment to future tax benefits
for US GAAP is required.
Australian GAAP allows offsetting of future
income tax benefits and liabilities to theextent they will reverse in the same period.
Under US GAAP, deferred tax liabilities
and deferred tax assets are offset andpresented for each tax paying componentof an enterprise and within each particular
tax jurisdiction. The impact of thedifference in this approach to Australian
GAAP has been adjusted for in the
US GAAP reconciliation for total assets.
As detailed in note 6, the Group
implemented tax consolidation during theyear. The amounts due to and receivablefrom the Holding Company are as follows:$2,097m$26m$2,123m

Amounts due fromgroup entities
Amounts due togroup entities

2004
$’000

2003
$’000

323

–

474

–

129*
128*

* Rounded to nearest whole cent and restated for rights issueiii) Sale-leaseback transactions
Under Australian GAAP for operatingleases, gains on disposal under saleleaseback transactions can be recognisedin the period of sale. Under US GAAP, thegain is amortised over the remaining lease
term. This difference in treatment has
been adjusted in the US GAAP reconciliation.
iv) Dividends in 2002
Historically Australian GAAP dividends
were shown in the statement of financial
performance in the period to which they
relate rather than in the period when they
are declared as required by US GAAP. Thisdifference in treatment has been adjusted
in the US GAAP shareholders’ equity
reconciliation. Changes in Australian
GAAP for 2003 disallowed accrual of
dividends, thus there is no adjustment
for the 2004 or 2003 years.

vi) Pension commitments
Under Australian GAAP, contributions in
respect of defined benefit schemes arerecorded in the income statement and aremade at levels necessary to ensure thatthese schemes are maintained with
sufficient assets to meet their actuariallyassessed liabilities. Any net deficiency
arising from the aggregation of assets andliabilities of the Group’s defined benefit
schemes, where there is a legal orconstructive obligation, is provided forin the Group’s financial statements(refer note 49).

financial report I 111

NOTES TO THE FINANCIAL
STATEMENTS
55: US GAAP RECONCILIATION(CONTINUED)
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 andrecognised prior service cost. In addition,
reconciliation between the accrued
pension liability/prepaid asset and thefunded status (difference between
projected benefit obligation and fair valueof pension plan assets) of the pension
schemes is required.
In the year ended 30 September 2003, as
required under US GAAP an additional
liability was recognised for the Group’s UK
Pension plan of $142 million ($99 million
after tax). As at 30 September 2004,
based on 30 June 2004 actuarial
information, due to an improvement in theposition of the plan, this liability has been
reduced to $136 million ($95 million aftertax). In 2004, a liability was recognised for
the Group’s NBNZ pension plan of$35 million ($25 million after tax). Theseliabilities are required to be recognised
where the accumulated benefit obligation
exceeds the fair value of plan assets andan asset has been recognised as prepaid
pension cost, or the liability alreadyrecognised as unfunded accrued pension
cost, is less than the unfunded
accumulated benefit obligation.
vii) Post retirement and post
employment benefits
Post retirement and post employment
benefits other than pension payments are
not material and no adjustment isrequired 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 of market value adjustments
recognised as other comprehensive incomein Shareholders’ equity.

The residual emerging markets portfolio
had been classified as available with themarket value writedown taken through thestatement of financial performance forboth Australian and US GAAP purposes.
Except for the above, no adjustment isrequired to be made in the US GAAP
reconciliation as the effect of reclassifying
certain trading securities as available forsale is not material.
ix) Investment securities
US GAAP requires that investments notclassified as trading securities or as held
to maturity securities shall be classified asavailable for sale securities and berecorded at market value in accordancewith SFAS 115 ‘Accounting for Certain
Investments in Debt and Equity
Securities’. An adjustment is made in the
US GAAP reconciliation to reclassify
certain investment securities under
Australian GAAP to reflect available forsale securities which are carried at market
value with unrealised profits and losses inrespect of market value adjustments being
reported as other comprehensive 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 of a Loan – Income
Recognition and Disclosures’, requires thevalue of an impaired loan to be measured
as the present value of future cash flows
discounted at the loan’s initial effective
interest rate, the loan’s observable market
price or the fair value of the collateral,
if the loan is collateral dependent.
There is no requirement under Australian
GAAP to discount the expected future cash
flows attributable to impaired loans inassessing the level of specific provision
for doubtful debts.
No adjustment is required in the US GAAP
reconciliation as the estimated fair valueof impaired loans is not materiallydifferent from the carrying value (net ofthe allowance for loan losses).

xi) Accounting for the impairment of long
lived assets and for long lived assets tobe disposed of
SFAS 144 ‘Accounting for the Impairment
or Disposal of Long-Lived Assets’, requiresthat where an event or a change incircumstance indicates that the carrying
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 a committed plan to dispose of anasset, the asset should be reported at thelower of the carrying value or fair valueless selling costs.
The Group has assessed the carrying
values of all non-current assets and whererequired, have written down the assets totheir recoverable amounts.
xii) Accounting for transfers and servicing
of financial assets and extinguishmentsof liabilities and variable interest entities
SFAS 140 ‘Accounting for Transfers andServicing of Financial Assets andExtinguishments of Liabilities’ prescribes
the accounting and disclosure
requirements for transfers of financial
assets and extinguishments of liabilities.
Under certain circumstances, thestatement also requires a transferor of
financial assets that are pledged ascollateral to reclassify those assets, andthe transferee to recognise those assets
and their obligation to return them.
No adjustment is required in the US GAAP
reconciliation as the effect of applying theprovisions of SFAS 140 on total assets is
not material. Refer to note 39 for therequired disclosures.
In the year ended 30 September 2004, theGroup first applied the provisions of FASBInterpretation No. 46 (Revised)"Consolidation of Variable Interest
Entities" ("FIN 46R"). FIN 46R addresses
the consolidation of entities in which areporting enterprise has an economic
interest, but for which a voting interest
approach to consolidation is not effectivein identifying where control of the entity
really lies, or in which the equity investors
do not bear the economic risks andrewards of the entity. Overall, the objectiveof FIN46R is to improve the consistency andcomparability of financial statements ofenterprises engaged in similar activities.

112 I financial report

NOTES TO THE
FINANCIAL STATEMENTS
55: US GAAP RECONCILIATION(CONTINUED)
An entity is a Variable Interest Entity("VIE") if the entity’s equity at risk is not
sufficient to finance its activities without
additional subordinated financial support
from other parties. An entity is also a VIEif, as a group the holders of the equity
investment at risk lack any one of thefollowing characteristics:• Direct or indirect ability to makedecisions about the entity's activities
through voting rights• Obligation to absorb the expected
losses of the special purpose entity ifthey occur• The right to receive the residual returnsof the entity if there are any.
The Group is required to consolidate
those VIEs for which the Group is theprimary beneficiary.
Those entities that have been identified
as requiring consolidation as a result of
the application of FIN46R have beendetailed in note 55 xxii. These entities are
not consolidated or equity accounted
under Australian GAAP.
Details of the treatment of securitisations
under Australian GAAP are detailed innote 39.
The Group retains servicing and (for someloans) custodian responsibilities for soldloans. The fair value of these servicing
rights is estimated to be approximately$13 million as at 30 September 2004.
These interests are not considered to bematerial and as such have not beenadjusted for in the US GAAP reconciliation.
Following a securitisation the Group may
also receive any excess income derived by
the SPV after interest has been paid toinvestors and net credit losses andexpenses absorbed. Due to the significant
uncertainties inherent in estimating theunderlying loan repayment rates andinterest margins with respect to the theseloan securitisation programs, future cash
flows cannot be reliably measured and no
asset in relation to any entitlement toresidual income is recognised.

xiii) Comprehensive income
SFAS 130 ‘Reporting Comprehensive
Income’ establishes standards forreporting and display of comprehensive
income and its components.
Comprehensive income is defined as allchanges in shareholders’ equity during aperiod excluding those resulting frominvestments by shareholders anddistributions to shareholders.
Accordingly, the Group has shown
currency translation adjustments,
unrealised profit on available for salesecurities, additional pension liability andcertain SFAS 133 adjustments ascomponents of other comprehensive
income with net income according to US
GAAP forming the remaining componentof comprehensive income. Amounts
transferred in and out of comprehensive
income relating to unrealised profits onavailable for sale securities are specific toindividual assets. The fair value of equity
investments recorded as available for sale
subject to adjustment in the US GAAP
reconciliation was $14 million as at
30 September 2004 (2003: $4 million),with a book value of $2 million(2003: $2 million).
The movement in the unrealised gain
relating to these securities during the year
is equal to $10 million, realised gains
before tax on these securities during theyear is equal to $5 million (2003: $4 million).
The currency translation adjustment
through comprehensive income includes anet gain on hedges after tax of $21 million(before tax $30 million) (2003: net gain
after tax $126 million; before tax$180 million).
xiv) Earnings per share (‘EPS’)
Under US GAAP, EPS is computed inaccordance with SFAS 128 ‘Earnings Per
Share’. This Standard is similar toAustralian GAAP.

xv) Accounting for derivative instruments
and hedging activities
The Group has adopted SFAS 133‘Accounting for Derivative Instruments andHedging Activities’ as amended by SFAS
138 ‘Accounting for Certain Derivative
Instruments and Certain Hedging
Activities’ in its US GAAP reconciliationfrom 1 October 2000. SFAS 133 requires
all derivatives to be recognised onbalance sheet at fair value. Movements inthe fair value of derivatives are taken to
the statement of financial performance,
unless the derivatives meet the criteriaprescribed in SFAS 133 for fair value, cash
flow, or foreign currency hedges. If certain
criteria are met derivatives can be
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 the US GAAP reconciliation
may not be indicative of the Group’s risk
profile. The Group uses instruments andhedging techniques that are effective inmanaging interest rate risk and foreignexchange risk.
Further information on the results of theGroup’s hedging activities, and theeffectiveness of the risk management
policies, can be assessed better byconsidering the information provided oninterest rate risk in note 35, and theinformation on hedging derivatives
provided in note 38: Derivative Financial
Instruments. The accounting forderivatives under Australian GAAP isoutlined in note 1 (xiii).
Under SFAS 133, movements in the valueof derivatives designated as fair value
hedges are taken to the statement offinancial performance, along with the
movement in the fair value of theunderlying exposure that is being hedged
to the extent the hedge is effective. Theseamounts largely offset each other with any
ineffectiveness recognised in the US GAAP
statement of financial performance.

financial report I 113

NOTES TO THE
FINANCIAL STATEMENTS
55: US GAAP RECONCILIATION(CONTINUED)
Movements in the effective portion of thefair value of derivatives designated as
cash flow hedges are taken to othercomprehensive income.
Any ineffectiveness is recognised in
the US GAAP statement of financial
performance immediately. Amounts aresubsequently reclassified out of othercomprehensive income into earnings as
the hedged transaction impacts earnings.
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 atransitional adjustment to decrease othercomprehensive income by $52 million.
Changes in market conditions and theGroup’s hedging policies may result involatility in these US GAAP adjustments
going forward. The net gain/(loss) after tax
in the net income according to US GAAP
recognised during the September 2004
year, due to fair value and cashflow hedge
ineffectiveness (in respect of qualifying
hedges) or non compliance is($28) million and ($35) million, respectively.
xvi) Provisions
The recognition requirements for
restructuring provisions under Australia
GAAP and US GAAP are similar and assuch no adjustment has been made in thereconciliation. SFAS146 “Accounting for
Costs Associated with Exit or Disposal
Activities” has additional disclosure
requirements, which are addressedin the following.
During 2004 approximately 37% of thetotal restructuring and surplus leased
space expense for the year related to one
time termination and other staff benefits,
and for surplus premises space(2003: 92%) and the remainder for otherassociated costs including technology
costs. The personnel costs relate toongoing business initiatives in responseto changing market conditions thatdemanding streamlining of our front
offices across the business units.
These restructuring initiatives are
expected to be substantially implemented
over the next year.

The total restructuring provision as at 30
September is distributed as follows:

One time terminationand staff benefits
Excess premises
Other contract termination
and associated costs
Total

2004
$m

2003
$m

73
10

58
22

23

12

106

92

All restructuring costs are expensed andrecorded as operating expenses in themost appropriate category; for example,
termination benefits are recorded inpersonnel and, surplus premises arerecorded in premises, with the remainder
recorded in other.
Note 27 to the financial statements
provides additional details on the
movements in the provision for
restructuring costs.
xvii) Gain and non-capitalisable costs
recognised on entering joint venture
In accordance with Australian GAAP theGroup recognised a profit (net oftransaction costs) based on the difference
between fair value and carrying valueof the share of businesses transferred
to an external party on entering intoa joint venture.
Under US GAAP the gain may not berecognised as it occurred as a result of a
non-monetary transaction, which involved
transferring ownership of controlled
entities in exchange for a non-controlling
ownership interest in the joint venture.
xviii) Guarantees
As of 1 January 2003 FIN 45 ‘Guarantors
Accounting and Disclosure Requirements
for Guarantors, including indirect
Guarantees of indebtedness of Others’
requires a guarantor (for non derivative
contracts) to recognise at inception a
liability equal to the fair value of theobligations undertaken in issuing thatguarantee. The fair value of the obligationin issuing the guarantee at inception istypically equal to the net present value ofthe future amount of the premium
receivable under the contract.
ANZ provides a variety of guarantees andindemnifications to our customers toenhance their credit standing or allow
them to complete various business

transactions. The Group considers thefollowing off balance sheet non derivative
arrangements to be guarantees under FIN
45: Standby letters of credit, Guarantees,Bill endorsements, Documentary letters ofcredit, Performance related contingencies.
The fair value of the estimated liability
related to guarantees for the forementioned
instruments at 30 September 2004 has
been adjusted in the US GAAP reconciliation.
Standby letters of credit generally include
guarantees of payments for loans, credit
facilities, promissory notes and trade
acceptances and are generally issued inconnection with agreements made bycustomers with counterparties.
Documentary letters of credit are anundertaking by the bank to guarantee
payment to a beneficiary provided
documents are presented in strict
compliance with the terms and conditionsof the documentary credit. Performance
guarantees are issued to guarantee
completion of projects in accordance with
contract terms. They can be issued tosupport a customers obligation to supply
specified products, commodities ormaintenance or warranty services to athird party. ANZ as guarantor becomes
obligated to perform under the guarantee
when a counterparty does not fulfill
its obligations under an associatedcontract. The majority of these contracts
are short term.
Sold – credit derivatives also meet thedefinition of guarantees under thisstatement but are recorded in the statementof financial position at their fair value.
Details of the maximum potential amountof future payments can be found at note 48.
The amounts detailed in note 48 represent
the notional amounts that could be lostunder the guarantees and indemnifications
if there was a total default by theguaranteed parties, without considerationof possible recoveries.

114 I financial report

NOTES TO THE
FINANCIAL STATEMENTS

To the extent that the intrinsic value
increases in subsequent periods anadditional expense is recorded.

55: US GAAP RECONCILIATION(CONTINUED)

Variable share option plans include allplans with performance conditions. The
Group’s policy is to generally grant shareoptions at the average market price of theunderlying shares at the date of grant.

xix) Accounting for stock –compensation plans
Under Australian GAAP an expense is not
required to be recognised for shareoptions issued to employees or for sharesissued at a discount. However, ANZ
expenses the deferred share plan under
Australian GAAP.
SFAS 123 ‘Accounting for Stock-Based
Compensation’ requires shares andoptions issued as part of a compensation
plan 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.
For US GAAP, APB No.25 share-based
employee compensation cost for variable
share option plans (those withperformance hurdles) is measured using
the intrinsic value method. US GAAP
compensation cost is determined at dateof issue and is expensed if the strike priceis less than the market price at the timeand it is probable that performance
hurdles are met.

Share issues to employees under the$1000 Share Plan are expensed in theyear issued under US GAAP. Under
Australian GAAP they are issued from
Share Capital Account and are notexpensed. An adjustment is made in the
US GAAP reconciliation for $22 million(2003: $18 million).
The following amounts were booked as acompensation expense during the year in
relation to stock based compensation:

Gross1After tax2

2004
$m

2003
$m

90
63

68
48

1 This includes the Deferred Share Plan which is also
expensed under Australian GAAP.
2 The tax deduction for the deferred share and the $1,000
share plan occurs at the time that shares are issued.
The tax effect is recognised under Australian GAAPand therefore, no adjustment is made in the
US GAAP reconciliation.

financial report I 115

NOTES TO THE FINANCIAL STATEMENTS
55: US GAAP RECONCILIATION (CONTINUED)
xix) Accounting for stock – compensation plans (continued)
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.
The fair value of the options has been calculated using a modified Black-Scholes option pricing model. The fair value is calculated as at the
grant date and the value amortised on a straight-line basis over the vesting period. Note 4 details the assumptions taken into account in thefair value calculation. An adjustment is made in the US GAAP reconciliation for $21 million (2003: $3 million).
2004
$m

2003
$m

2002
$m

Net income according to US GAAP
Intrinsic method adjustment (APB 25)
Fair value adjustment (SFAS 123)

2,788
43
(53)

2,380
21
(50)

2,097
40
(44)

Adjusted Pro Forma net income according to US GAAP

2,778

2,351

2,093

– Basic earnings per share (cents)*– Diluted earnings per share (cents)*

2004
As
Reported

2004
Pro
Forma

2003
As
Reported

2003
Pro
Forma

2002
As
Reported

2002
Pro
Forma

155
149

155
149

144
144

143
142

127
126

127
126

* Rounded to nearest whole cent and restated for rights issue

Details of the share-based compensation plans are included in note 50.
xx) Classification of financial instruments with characteristics of both liability and equity – all new issues post May 2003
Under Australian GAAP, preference shares issued on 23 September 2003 (known as ANZ StEPS) are classified as equity instruments as they are
not considered to be mandatorily converting to ordinary shares and do not meet the classification requirements of a financial liability upon issue.
SFAS 150 ‘Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity’ requires that the StEPS be classified as
a liability because the monetary value of the obligation to the holders of the securities is known at inception and the holders are not exposed tochanges in the fair value of equity. Any associated dividends have been reclassified as interest expense in the US GAAP reconciliation.
SFAS 150 does not apply to issues of preference shares made prior to 31 May 2003.

116 I financial report

NOTES TO THE FINANCIAL STATEMENTS
55: US GAAP RECONCILIATION (CONTINUED)
xxi) Details of Pension Schemes and Pension Expense
Reconciliations of the funded status of major defined benefit schemes as at 30 June 2004 are summarised below.
Details of the funding of the schemes are set out in note 49.
Australian Scheme
2004
$m

2003
$m

2002
$m

Change in benefit obligation
Balance at start of year
Interest costs
Benefits paid
Actuarial gains (losses)

50
2
(5)
(3)

51
3
(6)
2

54
3
(6)
–

Benefit obligation, 30 June

44

50

51

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

35
4
–
(5)

43
(2)
–
(6)

49
–
–
(6)

Total fair value of plan assets, 30 June

34

35

43

Funded status

(10)

(15)

(8)

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

–
10
(10)

1
16
(17)

2
10
(12)

Net amount recognised

(10)

(15)

(8)

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

–
(10)

–
(15)

–
(8)

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

6.0%

5.0%

6.0%

2.5%
7.5%

2.5%
7.5%

2.5%
7.5%

Weighted average assets allocations- Equity securities- Debt securities- Real estate- Other

61%
23%
9%
7%

n/a*
n/a*
n/a*
n/a*

n/a*
n/a*
n/a*
n/a*

100%

n/a*

n/a*

* Information is not available

The Plan's investment objectives are to maximise returns over the long term whilst accepting a moderate degree of performance variability;
and to exceed inflation (CPI increases), on average, by at least 3% over rolling five and seven year periods. The Plan's investment strategy is
to combine 70% growth assets (shares and property) and 30% defensive assets (diversified fixed income and cash). This combination
reduces the expected variability compared to a portfolio invested only in shares.

financial report I 117

NOTES TO THE FINANCIAL STATEMENTS
55: US GAAP RECONCILIATION (CONTINUED)
xxi) Details of Pension Schemes and Pension Expense (continued)
Cash Flows
Contributions
It is anticipated that nil will be contributed to this scheme in 2005.
Estimated Future Benefit Payments
The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:
Year

2005
2006
2007
2008
2009
2010-142004$m
Pension Benefits

2004$mOther Benefits

5
5
5
4
4
18

–
–
–
–
–
–

UK Pension Scheme
2004
$m

2003
$m

2002
$m

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

952
12
49
(46)
(11)
19

1,034
13
53
(49)
56
(155)

1,038
15
62
(62)
27
(46)

Benefit obligation, 30 June

975

952

1,034

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

790
71
8
(46)
16

982
(4)
(1)
(49)
(138)

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

Total fair value of plan assets, 30 June

839

790

982

Funded status

(136)

(162)

(52)

Unrecognised net transition gain
Unrecognised loss
Unrecognised prior service cost
Adjustment required to recognise minimum benefit obligation

(3)
165
32
(136)

(10)
194
44
(142)

(19)
92
46
–

Net amount recognised

(78)

(76)

67

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

58
(136)

66
(142)

67
–

5.75%
5.75%

5.25%
5.25%

5.75%
5.75%

4.50%
2.75%
7.00%

4.25%
2.25%
6.25%

4.5%
2.5%
6.75%

Change in benefit obligation

Change in plan assets

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

118 I financial report

NOTES TO THE FINANCIAL STATEMENTS
55: US GAAP RECONCILIATION (CONTINUED)
xxi) Details of Pension Schemes and Pension Expense (continued)
The Trustee of the ANZ UK Staff Pension Scheme determines their investment strategy after consulting with the Bank with regard to theliability profile of the plan and in accordance with the Statement of Investment Principles. Following an asset liability modelling exercise,
the Trustee has determined the following benchmarks which they believe provide an adequate balance between maximising the return on
the assets and minimising the risk of failing to meet the liabilities over the long term:
Weighted average assets allocations- Equity securities- Debt securities- Real estate- Other

2004

2003

2002

50%
34%
15%
1%

45%
36%
15%
4%

n/a*
n/a*
n/a*
n/a*

100%

100%

n/a*

* Information is not available

Cash Flows
Contributions
It is anticipated that $12 million will be contributed to this scheme in 2005.
Estimated Future Benefit Payments
The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:
Year

2005
2006
2007
2008
2009
2010-142004$m
Pension Benefits

2004$mOther Benefits

48
50
53
55
55
314

–
–
–
–
–
–

financial report I 119

NOTES TO THE FINANCIAL STATEMENTS
55: US GAAP RECONCILIATION (CONTINUED)
xxi) Details of Pension Schemes and Pension Expense (continued)
NZ Scheme
2004
$m

2003
$m

2002
$m

Change in benefit obligation
Balance at start of year
Increase due to NBNZ acquisition
Service cost
Interest cost
Benefits paid
Actuarial gains (losses)
Foreign currency exchange rate fluctuations

–
183
4
7
–
–
10

–
–
–
–
–
–
–

–
–
–
–
–
–
–

Benefit obligation, 30 June

204

–

–

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

–
151
7
3
–
8

–
–
–
–
–
–

–
–
–
–
–
–

Total fair value of plan assets, 30 June

169

–

–

Funded status

(35)

–

–

–
–
–
–

–
–
–
–

–
–
–
–

Net amount recognised

(35)

–

–

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

–
(35)

–
–

–
–

Unrecognised net transition gain
Unrecognised loss (gain)
Unrecognised prior service cost
Adjustment required to recognise minimum 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

6.4%
6.4%

–
–

–
–

3.0%
4.3%
8.0%

–
–
–

–
–
–

Weighted average assets allocations- Equity securities- Debt securities- Real estate- Other

53%
26%
–
21%

–
–
–
–

–
–
–
–

100%

–

–

Assets in the Fund are held in pooled funds and are managed by specialist investment managers. Investment returns are measured against
the relevant market index for each assets class and are targeted to outperform the index by a prescribed amount over a three-year period.
The strategic range around the asset allocation benchmarks is 10 percentage points.

120 I financial report

NOTES TO THE FINANCIAL STATEMENTS
55: US GAAP RECONCILIATION (CONTINUED)
xxi) Details of Pension Schemes and Pension Expense (continued)
Cash Flows
Contributions
It is anticipated that approximately 20.7% of salaries (gross of tax) will be contributed to this scheme in 2005.
This will be subject to a full actuarial valuation in March 2005.
Estimated Future Benefit Payments
The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:
Year

2005
2006
2007
2008
2009
2010-142004$m
Pension Benefits

2004$mOther Benefits

7
7
7
7
7
38

–
–
–
–
–
–

The elements of the net periodic pension cost of the above schemes are as follows:
2004
$m

2003
$m

2002
$m

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

16
58
(60)
(6)
4
4

14
57
(70)
(6)
–
4

13
59
(77)
(7)
–
4

Net periodic pension cost

16

(1)

(8)

Amortisation of prepaid pension expense
Employer contributions

–
(11)

–
(1)

(8)
(2)

5

(2)

(18)

Net pension expense

The Group also sponsors defined contribution schemes. The Group’s contributions to major defined contribution schemes amounted to $127
million for the year (2003: $102 million; 2002: $80 million).

financial report I 121

NOTES TO THE FINANCIAL STATEMENTS
55: US GAAP RECONCILIATION (CONTINUED)xxii) Variable Interest Entities
The following entities have been identified as requiring consolidation as a result of the application of FIN46R on the basis that the Group is
the Primary Beneficiary. These entities are not consolidated or equity accounted under Australian GAAP:
EntityNatureArc Funding Pty Ltd

Repackaging Vehicle

Aurora Securitisation Pty Ltd

Conduit2

Eos

Echo Funding Pty Ltd

SPV issues commercial paper in the United States andon-lends the funds to special purpose companies that acquireor hold financial assets.

370

ANZ Client deal
Capital Markets funded

SPV issues commercial paper to finance the acquisition or
holding of financial assets.

221

Repackaging Vehicle

SPV issues commercial paper to finance the acquisition or
holdings of financial assets.

178

SPV issues medium term notes on a segregated series basis
and uses the funds to acquire bonds or exposures throughcredit derivatives.

77

SPV raises funds by issuing debt instruments and uses thefunds so raised to acquire assets / investments.

291

SPV raises funds by issuing notes to Aurora Securitisation.
The proceeds of notes are used to finance theacquisition or holding of financial assets.

279

SPV raises funds by issuing notes to Aurora Securitisation.
The proceeds of notes are used to finance the acquisition or
holding of financial assets

68

SPV issues commercial paper to finance the acquisition or holdingof financial assets.

37

SPV issues commercial paper and on-lends the funds to special
purpose trusts that acquire or hold financial assets.

178

SPV issues commercial paper to finance the acquisition or holdingof financial assets.

152

SPV raises funds by issuing notes to Coast Asset Corporation.
The proceeds of notes are used to finance the acquisitionor holding of financial assets.

157

Conduit

Repackaging Vehicle

Omeros II Trust

Conduit
Repackaging Vehicle

Omeros Trust

1

Orion
Solera Trust
Stellar Funding Pty Ltd
Surf Capital

174
2,147

Kingfisher Securitisation Pty Ltd
1

SPV issues commercial paper to finance the acquisitionor holding of financial assets.

Total Assets*$m

SPV issues commercial paper and on-lends the funds tospecial purpose trusts that acquire or hold financial assets.

Coast Asset Corporation

Coral3

Purpose & Activities

Repackaging Vehicle

Repackaging Vehicle
Repackaging Vehicle
Repackaging Vehicle
Repackaging Vehicle

1 Consolidates into Aurora Securitisation Pty Ltd
2 Consolidates into Solera Trust
3 Consolidates into Coast Asset Corporation* Total assets are shown gross of any consolidation eliminations

122 I financial report

NOTES TO THE FINANCIAL STATEMENTS
55: US GAAP RECONCILIATION (CONTINUED)xxii) Variable Interest Entities (continued)
The Group also holds a significant variable interest in the following Variable Interest Entities; however, it is not the Primary Beneficiary:
EntityNaturePurpose & Activities

Kingfisher Trust 2001-1G

ANZ client deal. Capital
markets funded

Kingfisher Trust 2004-1G

ANZ client deal. Capital
markets funded

Trust raises funds by issuing notes tothe market. Proceeds of notes areused to fund the acquisition of
Receivables and Related Securities.
Trust raises funds by issuing notes tothe market. Proceeds of notes areused to fund the acquisition of
Receivables and Related Securities.

Total Assets$mMaximum exposure to loss*
$m

613

88

1,383

80

* Maximum exposure to loss is considered to be the notional amounts of the liquidity and redraw facilities

xxiii) Maturity analysis of the Group’s Bonds and Notes and Loan Capital
2004
$m

2003
$m

2002
$m

Less than 1 year
Between 1 year and 2 years
Between 2 years and 3 years
Between 3 years and 4 years
Between 4 years and 5 years
After 5 years
Perpetual

4,657
9,568
5,128
3,537
5,483
7,285
419

4,289
3,360
5,481
1,994
2,552
4,084
442

3,972
5,068
2,131
3,024
1,962
969
1,027

Total

36,077

22,202

18,153

At 30 Septemberxxiv) Material business combination in the year of acquisition
On 1 December 2003, the Company acquired 100% of the issued share capital of NBNZ Holdings Ltd and its controlled entities. The numberof shares acquired was 159 million. The results of NBNZ's operations have been included in the consolidated financial statements since that
date. NBNZ is a leading bank in New Zealand.
The aggregate purchase price under US GAAP was $4,805 billion (converted as at the date of acquisition). The following table summarises
the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition, at the exchange rate which prevailed at
the date of acquisition.
Fair Value of NBNZ’s
Net Assets Acquired$M

Liquid assets
Due from other financial institutions
Trading securities
Investment securities
Net loans and advances
Other assets
Premises and equipment

799
2,597
1,653
213
30,564
1,722
160

Total assets acquired

37,708Due to other financial institutions
Deposits and borrowings
Provisions
Creditors and other liabilities
Unsubordinated debt
Loan capital

1,092
30,694
109
2,455
1,119
488

Total liabilities assumed

35,957

Net assets acquired

1,751

Goodwill

3,054

The amount of goodwill under US GAAP is not the same as that recognised under Australian GAAP, as the cost of the hedges of the acquisition price are notconsidered part of the acquisition price under US GAAP.

financial report I 123

NOTES TO THE FINANCIAL STATEMENTS
55: US GAAP RECONCILIATION (CONTINUED)
xxiv) Material business combination in the year of acquisition (continued)
Operating result of ANZ had the acquisition of NBNZ occurred on 1 October 2002 for the 2004 and 2003 financial years
The following table illustrates the impact to the Group results, had NBNZ been acquired at the commencement of the 2003 financial year.
Year ended
30 September 2004$m

Operating income
Income before extraordinary items and the cumulative effect of accounting changes
Net income
EPS*

Year ended
30 September 2003
$m

17,622–
2,719
153

14,274–
2,687
145* Rounded to nearest whole cent

The pro-forma net income reported above includes $550 million in 2004 and $409 million in relation to NBNZ in 2003.
The balances have been adjusted to reflect the difference in depreciation and amortisation expense caused by any variation between the fair value
acquired, and the carrying value of these assets in the accounts of ANZ. No adjustment has been made for any change to accounting policies.
Net income in 2003 has not been adjusted for FAS133 ‘Accounting for Derivative Instruments and Hedging Activities’ as NBNZ did notprepare US GAAP accounts prior to acquisition.
Disposal of controlled entities
There were no material controlled entities disposed of during the year to 30 September 2004.
(xxv) Recently issued Australian accounting standards
A number of new accounting standards have been issued by the Australian Accounting Standards Board (AASB) that have not yet been
adopted for Australian GAAP. A summary of the standards that currently apply appear in note 1.
We will also be required to adopt the Australian equivalents of International Financial Reporting Standards (IFRS) as issued by the AASB, forthe half-year ending 31 March 2006 and year ending 30 September 2006. A summary of the significant areas of impact of adopting IFRS
appears in note 57.
Some of these standards, once adopted, will result in certain adjustments in the reconciliations of net income to US GAAP and shareholders'equity to US GAAP no longer being required.

56: EXCHANGE RATESThe exchange rates used in the translation of the results and the assets and liabilities of major overseas branches and controlled entities are:
2004

Great British pound
United States dollar
New Zealand dollar

Closing

Average

0.39830.71651.07000.40540.72631.1254

2003
Closing

0.40700.6795
1.1431

Average

Closing

2002
Average

0.38220.6124
1.11390.34770.5441
1.15850.3621
0.53231.2001

124 I financial report

NOTES TO THE FINANCIAL STATEMENTS
57: INTERNATIONAL FINANCIAL REPORTING STANDARDSFor reporting periods beginning on or after 1 January 2005, the Group will be required to prepare financial statements using AustralianStandards that have been revised to satisfy the requirements of International Financial Reporting Standards (IFRS) as issued by theInternational Accounting Standards Board. The Group will report for the first time in compliance with Australian equivalents to IFRS when
the results for the half-year ended 31 March 2006 and the year ended 30 September 2006 are released.
The Group is required to prepare an opening balance sheet in accordance with Australian equivalents to IFRS as at 1 October 2004. Most
accounting policy adjustments to retrospectively apply Australian equivalents to IFRS will be made against retained earnings in this opening
balance sheet. However, transitional adjustments relating to those standards for which comparatives are not required will only be made on
1 October 2005. Comparatives are not required for AASB 132: Financial Instruments: Disclosure and Presentation, AASB 139: Financial
Instruments: Recognition and Measurement and AASB 4: Insurance Contracts.
A Steering Committee is monitoring the adoption of IFRS as per the Group's implementation plan. This Committee has been following
developments in IFRS and the likely impact that these standards will have on our products and our customers, and on our own financial
reports and accounting policies. Dedicated workstreams are responsible for evaluating the impact of a specific group of accounting changes.
Each workstream is progressing through multiple phases of work: technical evaluation, design, development and implementation. The Group
has largely completed the technical evaluation phases of each workstream, and is moving into design, development and implementation.
The program is achieving scheduled milestones.
The following areas have been identified as significant for the Group:
Credit Loss Provisioning
Initial impact on retained earnings at
1 October 2005
Volatility in future earnings
Lower general provision

IFRS adopts an approach known as "incurred losses" for credit loss provisioning and provides
guidance on measurement of incurred losses. Provisions are raised for losses that have alreadybeen incurred for exposures that are known to be impaired. The estimated losses on these impaired
exposures are then discounted to their present value. As this discount unwinds, there is a resulting
recognition of interest in the statement of financial performance during the period between recognitionof impairment and recovery of the written down amount.
Exposures found not to be impaired are placed into pools of similar assets with similar risk
characteristics to be collectively assessed for losses that have been incurred, but not identified
yet. The required provision is estimated on the basis of historical loss experience for assets withcredit risk characteristics similar to those in the collective pool. The historical loss experience isadjusted based on current observable data.
The current ELP charge to profit will be replaced, on adoption of IFRS, by a charge for specificprovisions on impaired exposures, plus a charge for movements in the provision that is held for
exposures that are being collectively assessed for impairment.
It is anticipated that the proposed changes will result in a reduction in the level of provisioning
which the bank holds against its credit exposures.

Debt v Equity classification
Initial impact on statement offinancial position at 1 October 2005
New liabilities recognised

The Group has issued a number of hybrid tier one instruments. The ANZ StEPS issue, which is currently
treated as equity, will be reclassified as debt. Distributions on ANZ StEPS will be treated as interest
rather than dividends.

Fee Revenue
Initial impact on retained earnings at
1 October 2005 for yield adjusted feesand 1 October 2004 for other financial
service fees
Increased deferral of fee income

Revised rules governing the accounting for fee income will result in more fees being deferred on
initial payment, and recognised either as an adjustment to yield or over the period of service. Fees
required to be treated as an adjustment to yield will be recognised in interest income rather thanfee income. On initial application, certain fees that have previously been recognised in the statement offinancial performance will be recognised in the statement of financial position, with a corresponding
reduction to retained earnings. The annual impact on net profit from this change is not expected
to be material.

Goodwill
Initial impact on retained earnings at
1 October 2004
Volatility in future earnings

The current Group policy of amortising goodwill over the expected period of benefit will cease.
Instead, goodwill will be subject to impairment testing annually, or more frequently if eventsor circumstances indicate that it might be impaired. This change in policy may result in increased
volatility of future earnings where impairment losses may occur.

financial report I 125

NOTES TO THE FINANCIAL STATEMENTS
57: INTERNATIONAL FINANCIAL REPORTING STANDARDS (CONTINUED)
Hedging
Initial impact on retained earnings at
1 October 2005
Volatility in future earnings
New assets/liabilities recognised

All derivatives contracts, whether used as hedging instruments or otherwise, will be carried at fairvalue on the Group's statement of financial position. IFRS recognise fair value hedge accounting, cash
flow hedge accounting, and hedges of investments in foreign operations. Fair value and cash flow
hedge accounting can only be considered where effectiveness tests are met. Ineffectiveness outside
the prescribed range precludes the use of hedge accounting and can result in significant volatility inthe statement of financial performance. The Group expects to predominantly use cash flow hedging inrespect of its interest rate risk hedges, which will create volatility in equity reserve balances.
The hedging rules will impact the way the Group accounts for hedges of its funding and for hedges of
its statement of financial position. Customer trading, where all derivatives are currently marked tomarket, will not be impacted.

Post Employment Benefits
Initial impact on retained earnings at
1 October 2004
Volatility in future earnings

The Group does not currently recognise an asset or liability for the net position of the defined
benefit superannuation schemes, including those which operate in Australia, New Zealand andthe United Kingdom. On adoption of AASB 119: Employee Benefits, the Group will recognise thenet position of each scheme on the statement of financial position, with a corresponding entry to
the statement of financial performance. The initial adjustment will be made, retrospectively,
against opening retained earnings as at 1 October 2004, and will be based on actuariallydetermined valuations of each scheme made at that date in accordance with AASB 119. After thetransitional adjustment, further movements in the net position of each scheme will be recognisedin the statement of financial performance.

Securitisation
Initial impact on retained earnings at
1 October 2004
New assets/liabilities recognised

IFRS introduces new requirements for the recognition of financial assets, including thosetransferred to a special purpose vehicle for securitisation. Existing securitisations, both of ourown assets and of our customers' assets, require an assessment of the accounting treatment thatwill be required under IFRS. Further, a different interpretation of the consolidation rules applicableto special purpose vehicles may result in some vehicles, which were previously not consolidated,being consolidated by the Group. Securitisations commenced on or after 1 January 2004 havebeen assessed in accordance with IFRS and current Australian GAAP.

Share-Based Payments
Initial impact on retained earnings at
1 October 2004
Higher expenses

The Group currently recognises immediately an expense equal to the full fair value of all deferredshares issued as part of the short and long-term incentive arrangements. The deferred shares vest
over one to three years, and may be forfeited under certain conditions. The Group does not
currently recognise an expense for options issued to staff, shares issued under the $1,000
employee share plan, nor for the 5% discount applicable to the ANZ Share Save Scheme. On
adoption of AASB 2: Share-based Payments, the Group will recognise an expense for all sharebased remuneration, including deferred shares and options, and will amortise those expenses
over the relevant vesting periods. The Group will also recognise an expense for shares issued
under the $1,000 employee share plan, and for the 5% discount on shares granted under the ANZ
Share Save Scheme. On transition, this change in accounting policy will result in a reduction inretained earnings at 1 October 2004.

Taxation
Initial impact on retained earnings
at 1 October 2004
New assets/liabilities recognised

Under AASB 112: Income Taxes, a "balance sheet" approach will be adopted, replacing the"statement of financial performance" approach currently used. This method recognises deferred
tax balances when there is a difference between the carrying value of an asset or liability and its
tax base. It is expected that the standard may require the Group to carry a slightly higher level ofdeferred tax assets and liabilities.

Capital measurement - The Australian Prudential Regulation Authority (APRA) has announced that it intends to revise its capital adequacy
requirements to take account of the impact of IFRS. This will be achieved through the progressive release of a series of discussion papers.
Priority areas for review by APRA include the treatment of innovative capital instruments for capital adequacy purposes and the treatmentof superannuation fund surpluses and deficits. APRA has stated that it will not make any IFRS-related changes to the existing prudential
framework until it has completed relevant consultations, and not before 1 July 2005 at the earliest. In the interim, existing prudential
standards will continue to apply.

126 I financial report

NOTES TO THE FINANCIAL STATEMENTS
58: EVENTS SINCE THE END OF THE FINANCIAL YEARANZ Trustees merger with Equity Trustees Limited
On 12 October 2004, the Company announced it had signed an agreement with Equity Trustees Limited, to merge the Group's trustee
business with Equity Trustees Limited. The merged business will create Australia's third largest trustee company and the leading manager ofcharitable foundations.
In consideration, the Company will become the major shareholder in Equity Trustees Limited with a 37.5% share of the expanded issued
capital, and receive $3 million in cash.
Completion of the merger is expected early in 2005 subject to the outcomes of due diligence, regulatory and government approvals andapproval by Equity Trustees' shareholders. The Company will equity account for its investment in Equity Trustees Limited and recognise asmall profit from the transfer of the Group's trustee business.
The financial effect of this merger has not been recognised in these financial statements.
Share buyback
On 26 October 2004, the Company announced the intention to undertake an on-market share buyback of at least $350 million.
The buyback is contingent on regulatory approval for a new offshore hybrid equity transaction.
The financial effect of this buyback has not been reflected in these financial statements.
Sale of London-headquartered project finance activities
On 26 October 2004, the Company announced entry into a Memorandum of Understanding for the sale, subject to due diligence and otherstandard conditions, of the majority of its London-headquartered project finance activities to Standard Chartered Bank. The amount of theloans and commitments is approximately $2 billion. The premium from the sale above book value is not expected to be significant.
The financial effect of this sale has not been reflected in these financial statements.

financial report I 127

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 other mandatory professional reporting requirements; andii) giving a true and fair view of the financial position of the Company and of the consolidated entity as at 30 September 2004 and of
their performance as represented by the results of their operations and their cash flows, for the year ended on that date; andiii) that the directors have been given the declaration under section 295A of the Corporations Act 2001; andb) in the directors’ opinion at the date of this declaration there are reasonable grounds to believe that the Company will be able to pay its
debts as and when they become due and payable.
The Company and some of its wholly owned controlled entities (listed in note 48) executed a Deed of Cross Guarantee enabling them to takeadvantage of the accounting and audit relief offered by class order 98/1418 (as amended), dated 13 August 1998 issued by the Australian
Securities and Investments Commission.
The nature of the Deed of Cross Guarantee is to guarantee each creditor payment in full of any debt in accordance with the terms of the Deedof Cross Guarantee.
At the date of this declaration, there are reasonable grounds to believe that the Company and its controlled entities which executed the Deedof Cross Guarantee are able, as an economic entity, to meet any obligations or liabilities to which they are, or may become, subject by virtueof the Deed of Cross Guarantee.
Signed in accordance with a resolution of the directors.

Charles Goode
Director
4 November 2004

John McFarlane
Chief Executive Officer

128 I financial report

INDEPENDENT AUDIT REPORT TO THE MEMBERS OF AUSTRALIA AND
NEW ZEALAND BANKING GROUP LIMITED.
SCOPE
We have audited the financial report of Australia and New Zealand Banking Group Limited for the financial year ended 30 September 2004,
consisting of the remuneration report, the statements of financial position, statements of financial performance, statements of changes inshareholders’ equity and statements of cash flows, and accompanying notes 1 to 58 and the directors’ declaration, set out on pages 6 to127. The financial report includes the consolidated financial statements of the consolidated entity, comprising the Company and the entities
it controlled at the end of the year or from time to time during the financial year. The Company’s directors are responsible for the financial
report. We have conducted an independent audit of this financial report in order to express an opinion on it to the members of the Company.
Our audit has been conducted in accordance with Australian Auditing Standards. Those standards require that we plan and perform an audit
to obtain reasonable assurance about whether the financial report is free of material misstatement. Our procedures included examination, on
a test basis, of evidence supporting the amounts and other disclosures in the financial report, and the evaluation of accounting policies andsignificant accounting estimates. These procedures have been undertaken to form an opinion whether, in all material respects, the financial
report is presented fairly in accordance with Accounting Standards and other mandatory professional reporting requirements in Australia andstatutory requirements so as to present a view which is consistent with our understanding of the Company’s and the consolidated entity’s
financial position, and performance as represented by the results of their operations and their cash flows.
The audit opinion expressed in this report has been formed on the above basis.

AUDIT OPINION
In our opinion, the financial report of Australia and New Zealand Banking Group Limited is in accordance with:a) the Corporations Act 2001, including:i) giving a true and fair view of the Company’s and consolidated entity’s financial position as at 30 September 2004 and of theirperformance for the financial year ended on that date; andii) complying with Accounting Standards in Australia and the Corporations Regulations 2001; andb) other mandatory professional reporting requirements in Australia.

KPMG
Melbourne
4 November 2004

Chris Hall
Partnerfinancial report I 129

CRITICAL ACCOUNTING POLICIESThe Group prepares its consolidated
financial statements in accordance with
Australian Accounting Standards andother authoritative accounting
pronouncements. However,notwithstanding the existence of relevant
accounting standards, there are a numberof critical accounting treatments, which
include complex or subjective decisions orassessments. The Group requires all suchapplications of judgement to be reviewed
and agreed by Group Finance, and where
the impact is material, the accounting
treatment is 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
There have been no material changes to
the Group’s critical accounting policies
or their related methodologies over thelast 3 years.
A brief discussion of critical accounting
policies, and their impact on theGroup, follows:a) Economic Loss Provisioning
Description and Significance
Each month the Group recognises an
expense for credit losses ‘provision for
doubtful debts’ based on the average one
year loss expected to be incurred if thesame loan portfolio was held over an
economic cycle. The provision for
doubtful debts is booked to the General
Provision which is maintained to cover thelosses inherent in the Group’s existing
loan portfolio. The method used by theGroup for determining the expense charge
is referred to as ‘Economic Loss
Provisioning’ (ELP). The Group uses ELP
models to calculate the expected loss byconsidering:> the size, composition and risk
profile of the current loan portfolio;
and> the history of credit losses for eachloan portfolio.

Ongoing reviews
The Group regularly reviews theassumptions used in the ELP models.
These reviews are conducted inrecognition of the subjective nature of the
ELP methodology. Methodologies are
updated as improved analysis becomes
available. In addition, the robustness ofoutcomes is reviewed considering theGroup’s actual loss experience, andlosses sustained by other banks operatingin similar markets.
To the extent that credit losses are notconsistent 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 periodicallyincreased 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 additionalcharge to profits to ensure the adequacyof the General Provision. The Groupconsiders it appropriate to maintain
its General Provision in excess of the
APRA guidelines.
Quantification of Sensitivity
The average charge to profit for ELP was
0.31% of average net lending assets or$632 million (Sep 2003: 0.39% or$614 million; Sep 2002: 0.43% or$610 million excluding the special
general provision of $250 million).
As at September 2004, the balance of theGeneral Provision of $1,992 million(Sep 2003: $1,534 million) represents
1.01% (Sep 2003: 1.01%) of risk
weighted assets.

b) Specific Provisioning
Description and Significance
The Group maintains a specific provision
for doubtful debts arising from its
exposure to organisations and credit
counterparties.
When a specific debt loss is identified as
being probable, its value is transferredfrom the general provision to the specificprovision. Specific provisioning is applied
when the full recovery of one of theGroup’s exposures is identified as being
doubtful resulting in the creation of a
specific provision equal to the full amountof the expected loss plus any
enforcement/recovery expenses.
Recoveries resulting from proceeds
received from accounts which were written
off in prior years are transferred back to
the General Provision.
Quantification of Sensitivity
The recognition of losses has an impact
on the size of the General Provision rather
than directly impacting profit. However, tothe extent that the General Provision isdrawn down beyond a prudent amount it
will be restored through a transfer fromthe current year’s earnings. The amountof net transfer from the General Provision
to the Specific Provision, net of recoveries,
during the year was $443 million(Sept 2003: $527 million; Sep 2002:$728 million).

130 I financial report

CRITICAL ACCOUNTING POLICIESc) Deferred acquisition costs, software
assets and deferred income
Description and Significance
The Group recognises assets andliabilities that represent:> Deferred acquisition costs – direct
costs from the acquisition of interest
earning assets;> Software assets – direct costs
incurred in developing softwaresystems; and> Deferred income – liabilities
representing income received inadvance of services performed.
Deferred acquisition costs – Initially,
expenses related to the acquisition ofinterest earning assets are recognised aspart of the cost of acquiring the asset andwritten-off as an adjustment to its yieldover its expected life. For assets subject toprepayment, expected life is determinedon the basis of the historical behaviour of
the asset portfolio, taking into accountprepayments. Commissions paid to third
party mortgage brokers are an example ofexpenditure that is deferred andamortised over the expected average lifeof a mortgage of 4 years.
Software assets – Costs incurred inacquiring and building software andcomputer systems are capitalised as fixed
assets and expensed as depreciation overperiods of between 3 and 5 years except
for the branch front end applications
where 7 years is used. The carrying valueof these assets is subject to a ‘recoverable
amount test’ to determine their value tothe Group. If it is determined that thevalue of the asset is less than its ‘book’
value, the asset is written down to therecoverable amount. Costs incurred inplanning or evaluating software
proposals, or in maintaining systems after
implementation, are not capitalised.
Deferred income – Income received inadvance of the Group’s performance ofservices or in advance of having been
earned, is initially recorded as a liability.
Once the recognition criteria are met, itis then recognised as income.

Quantification of Sensitivity
Deferred acquisition costs – At
30 September, the Group’s assets
included $465 million (Sep 2003:$360 million) in relation to costs incurredin acquiring interest earning assets.
During the year, amortisation of$218 million (Sep 2003: $178 million)
was recognised as an adjustment to theyield earned on interest earning assets.
Software assets – At 30 September,
the Group’s fixed assets included$430 million (Sep 2003: $465 million)
in relation to costs incurred in acquiringand developing software. During the year,
depreciation expense of $129 million(Sep 2003: $83 million) was recognised.
Following prior periods of above average
project activity which replaced significant
parts of the Group’s core infrastructure,
the software depreciation expense is
expected to stabilise going forward.
Consistent with US accounting rules onsoftware capitalisation, only costs
incurred during configuration, coding andinstallation stages are capitalised.
Administrative, preliminary project andpost implementation costs including
determining performance requirements,
vendor selection and training costs are
expensed as incurred.
Deferred income – At 30 September, theGroup’s liabilities included $149 million(Sep 2003: $280 million) in relation to
income received in advance. This income
is largely comprised of two components:(1) fees received for services not yet
completed; and (2) profit made on interest
rate swaps from a shortening investment
term of capital. Under Australian
Accounting Standards, this profit isdeferred and recognised when the hedgedtransaction occurs, or immediately if thehedged transaction is no longer
expected to occur.

financial report I 131

CRITICAL ACCOUNTING POLICIESThe balances of deferred assets and liabilities at 30 September were:
Deferred Acquisition Costs
2004
2003
$m
$m

Software Assets
2004
2003
$m
$m

Deferred Income
2004
2003
$m
$m

Personal Banking Australia
Institutional
New Zealand BusinessCorporate Australia
Esanda and UDC
Asia PacificGroup Centre

145
10
36
2
250
–
22

109
9
15
–
227
–
–

296
43
30
10
8
1
42

322
50
–
14
21
2
56

31
3
13
12
–
–
90

17
7
–
7
–
–
249

Total

465

360

430

465

149

280

2003
Brokerage
paid1$mBalance2$mDeferred acquisition costs analysis
Brokerage
amortised$m

2004
Brokerage
paid1$mBalance$m

Brokerage
amortised$m

Personal Banking Australia
Esanda & UDC
New Zealand BusinessInstitutional
Other3

64
147
7
n/a
n/a

89
177
11
n/a
n/a

145
250
36
10
24

41
133
4
n/a
n/a

70
175
8
n/a
n/a

109
227
15
9
–

Total

218

277

465

178

253

360

2

1 Brokerage paid includes brokerage trailer commissions that are not capitalised relating to the acquisition of mortgages assets
2 Includes capitalised debt raising expenses
3 Includes Group Centre and Corporate Australiad) 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 ING Australia ). The derivative instruments used to hedge the Group’s exposures include:> swaps;> forward rate agreements;> futures;> options; and> combinations of the above instruments.
The Group classifies derivatives into two types according to the purpose they are entered into: trading or hedging.
Income and loss relating to trading derivatives is reported in the statement of financial performance as trading income. The fair value of
trading derivatives is recorded on a gross basis as other assets or other liabilities as appropriate unless there is a legal right of set off. The
fair value of a derivative financial instrument is the net present value of future expected cash flows arising from that instrument.
In order to be classified as a hedging derivative the hedging relationship must be expected to be effective. Hedging derivatives areaccounted for in the same manner as the underlying asset or liability they are hedging. For example, if the hedged instrument is accounted
for using the accrual method, the hedging instrument will also be accounted for using the accrual method.
Accounting treatment – Derivative instruments entered into for the purpose of hedging are accounted for on the same basis as the underlying
exposures or risks.

132 I financial report

CRITICAL ACCOUNTING POLICIES
Derivative instruments entered into to hedge exposures that are not recorded at fair value, do not have their fair values recorded in theGroup’s Statement of Financial Position.
Exposures hedged by derivatives not recorded at their fair value include risks related to:> revenues from and capital invested into 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 derivativetransaction. If a hedge ceases to be effective, the hedging derivative transaction will be recognised at fair value. Gains and losses onderivative instruments not carried at their fair value amounts are recognised at the same time as the gain or loss on the hedged exposure isbooked.
Movements in the value of foreign exchange contracts that are hedging overseas operations are not recognised as income or expenses.
Instead these movements are recognised in the Foreign Currency Translation Reserve together with the net difference arising from thetranslation of the overseas operation.
Fair value determination – Derivatives entered into as part of the Group’s trading operations are carried at their fair values with any change infair 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.
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 treatment of 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 Group has established certain special purpose companies orvehicles controlled by the Group, which are consolidated into the Group's financial statements in order to facilitate transactions undertaken
for Group purposes. These special purpose companies or vehicles have been established as part of the Group's funding activities, forexample, the StEPS structure, and as part of lending activities undertaken in the normal course of business, where assets of the vehicles arerecorded as part of the Group's Net Loans and Advances.
The table below summarises the main types of SPVs that are not consolidated into the Group, the reason for their establishment, and the key
risks associated with them.
Type of Special
Purpose Vehicle (SPV)

Securitisation vehicles

SPV Assets
2004
2003
$m
$m

Reason for establishment

Key Risks

Assets are transferred to an SPV which funds
the purchase by issuing securities.

ANZ may manage securitisation vehicles,
13,013service assets in a vehicle or provide
liquidity or other support and retains therisks associated with the provision of these
services. Credit and market risks associatedwith the underlying assets are not retainedor assumed by ANZ except to the limited
extent that ANZ provides arm’s length services
and facilities.

9,954

Enables ANZ or customers to increase
diversity of funding sources.
The amount disclosed here is the total
assets of SPVs managed or arranged by ANZ.
It includes SPVs that purchase assets fromsellers other than ANZ.
Structured finance entities

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

ANZ may retain liquidity risk, if it provides
liquidity support to the vehicle. ANZ may also
manage these vehicles.

1,993

2,124

Managed funds

These funds invest in specified
investments on behalf of clients.

The ANZ/ING Australia joint venture and
ANZ National Bank Limited, as managersof the funds, expose ANZ to operationaland reputational risk.

32,17428,655

financial report I 133

CRITICAL ACCOUNTING POLICIESf) Valuation of investment in
ING Australia Limited (INGA)
Description and significance
The Group adopts the equity method of
accounting for its 49% interest in ING
Australia. As of 30 September 2004, theGroup's carrying value is $1,697 million(Sep 2003: $1,648 million).
The carrying value is subject to arecoverable amount test, to ensure that
this does not exceed its recoverable
amount at the reporting date. This
involved the Group obtaining an
independent valuation for 31 March 2004
reporting purposes to determine current
recoverable amount, with a review ofwhether there are any indicators that thecarrying value may be greater thanrecoverable amount for 30 September
2004 reporting purposes. Where there is
the existence of impairment indicators, afurther independent valuation is sourced
to determine current recoverable amount.
Any excess of carrying value above
recoverable amount is written off to theStatement of Financial Performance.
Quantification of sensitivity
During the year the Group engaged Ernst
and Young ABC Limited (EY ABC) to
provide an independent valuation of INGA
for 31 March 2004 assessment purposes.
The valuation was a stand alone market
based assessment of economic value, andexcluded the Group's specific synergies
and hedging arrangements. The
independent valuation was based on a
discounted cashflow approach, withallowance for the cost of capital. EY ABC
presented an independent valuation
range of $3,507 million to $3,793 million,
reflecting a range of sales and cost baseassumptions. Based on this review, ANZ
believed that no change was required tothe carrying value of the investment as at
31 March 2004.
A review for 30 September 2004 reporting
purposes revealed there were no
indicators of impairment and a further
independent review was not required.
As at 30 September 2004, ANZ believed
no change was required to the carrying
value of ANZ's investment in INGA.

g) Valuation of goodwill in ANZ National
Bank Ltd
Description and significance
Goodwill arising from the NBNZ
acquisition is systematically amortised by
way of a charge to the statement offinancial performance over the period oftime during which the benefits of theacquisition are expected to arise, such
period of benefit not exceeding 20 years.
The unamortised balance of goodwill
is reviewed at each balance date and iswritten down to the extent that it is
no longer supported by probablefuture benefits.
The Group engaged Morgan Stanley Dean
Witter Australia Limited to provide an
independent valuation prior to theamalgamation of NBNZ and ANZ Banking
Group New Zealand Ltd (ANZ New
Zealand) in June 2004. The valuation
ascribed separate values to NBNZ Life
Insurance Limited, the structured financebusiness and the core banking operations
of NBNZ. The valuation excluded thevalue of synergies ANZ expects to extractfrom the integration of the banking
operations of ANZ New Zealand and NBNZ.
The core banking operations were valued
using a capitalisation of earnings
methodology. Based on the results ofthis valuation, it is considered that there
is no indication of impairment as at
30 September 2004.

134 I financial report

RISK MANAGEMENTANZ recognises the importance ofeffective risk management to its businesssuccess. Management is committed toachieving strong risk control, resulting in"no surprises" and a distinctive risk
management capability that enables ANZ
business units to meet their performance,
growth and breakout objectives.
ANZ approaches risk management on aholistic basis, managing the various
elements of the system as a whole rather
than viewing them as independent andunrelated parts. The risk function is
independent of the business with clear
delegations from the Board and operates
within a comprehensive frameworkcomprising:> The Board, providing leadership, setting
risk appetite/strategy and monitoring
progress.
> A strong framework for development
and maintenance of Group-wide risk
management policies, procedures andsystems, overseen by an independent
team of risk professionals.
> The use of sophisticated risk tools,
applications and processes to execute
our global risk management strategy
across the Group.
> Business Unit level accountability,
as the "first line of defence", and for the
management of risks in alignment with
the Group's strategy.
> Independent oversight at Group-level
to ensure Business Unit compliancewith policies, regulations and laws,
and to provide regular risk evaluation
and reporting.
ANZ recognises that effective risk
management is based upon having anappropriate risk culture embedded in theorganisation. In recent years, significant
effort has been invested in actively
promoting a prudent and responsible
culture of risk management.
The various risks inherent in theoperations of the Group may be broadlygrouped together under the following
major categories:
Credit Risk
The Group has an overall lending objectiveof sound profitable growth. To support
this objective, a credit risk management
framework exists to provide a structured
and disciplined process for managing
credit risk.

This framework is top down, being defined
firstly by the Group's Vision and Values
and secondly, by Credit Principles andPolicies. The effectiveness of the credit
risk management framework is validated
through compliance and monitoringprocesses. These, in conjunction with theoverall Group portfolio strategy, define
and guide the credit process, organisationand staff.
Group Risk Management's responsibilities
for credit risk policy and management are
executed through dedicated departments,
which support the Group's wholesale andretail business units. All major Business
Unit credit decisions (including thosearising from automated decision
processes) require dual approval by bothbusiness writers and independent risk
personnel.
Market Risk
ANZ has a detailed market risk
management and control framework, tosupport trading activities, which
incorporates a risk measurement
approach to quantify the magnitude ofmarket risk within the trading books.
This approach, along with related
analysis, identifies the range of possible
outcomes that can be expected over agiven period of time, and establishes therelative likelihood of those outcomes.
Market risk also includes the risk that theGroup will incur increased interest
expense arising from funding
requirements during periods of poor
market liquidity (balance sheet or nontraded market risk). ANZ has a separate
risk management and control framework
for balance sheet risks, which is built
around a Board-approved policy and limit
framework. The framework quantifies themagnitude of risks and controls thepotential impact that changes in market
interest rates can have on the net interest
income (NII) and market value of equityof the Group.
Within overall strategies and policies,
control of market risk exposures at Grouplevel is the responsibility of Group Market
Risk, who work closely with the threebusiness units: Foreign Exchange andCommodities, Capital Markets,
and Group Treasury.

Operational Risk
Group Risk Management is responsible forestablishing the Group's framework andassociated Group-level operational risk
policies. Business Units are responsible
for the identification and day-to-day
management of operational risks.
A Risk Drivers and Controls Approach tooperational risk measurement is utilised
to measure the operational risk profile ofBusiness Units and allocate operationalrisk economic capital. This approachgives business managers strong and clear
incentive to reduce operational risk.
Compliance
ANZ's policy is to conduct its business inaccordance with the laws of the countries
in which it operates, relevant regulatorycodes of conduct, and standards set by
the Group. ANZ promotes a culture ofcompliance, where compliance is valued
and embedded in everyday business.
ANZ does not tolerate wilful or knowing
breaches of the law, codes of conduct orof its standards and staff are required toobserve these responsibilities.
In order to assist the Group identify,
manage, monitor and measure its
compliance obligations, the Group has acomprehensive regulatory complianceprogram in place, which is consistent with
the Australian Standard on Compliance
Programs (AS 3806).
Group Compliance, a discrete function
within Group Risk Management, is
responsible for setting, reviewing andmonitoring ANZ's Regulatory Compliance
Program. Business Units retain ultimate
day-to-day responsibility for compliancemanagement within their areas.
A comprehensive compliance frameworkhas been established to ensurecompliance with each of APRA's
Prudential Standards. Each standard isassigned to a specific Senior Executive foraccountability and control. For example,
dealings between the Company and its
subsidiaries and other related entities are
specifically governed by Board-approved
policies and procedures, which have been
designed to ensure compliance with
APRA's Prudential Standard APS222.

financial report I 135

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
assets

217
177

2,400
3,157

2,652
1,184

5,269
4,518

2.0
1.7

205
94

1,571
1,818

2,769
1,171

4,545
3,083

2.3
1.6

At 30 September 2004
United Kingdom
USA
At 30 September 2003
United Kingdom
USA

2: CERTIFICATES OF DEPOSIT AND TERM DEPOSIT MATURITIESThe 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 2004.
BetweenBetweenLess than 3 months and 6 months and3 months
6 months
12 months
$m
$m
$m

After
1 year
$m

Total
$m

7,702
14,751

2
1,625

380
895

4,147
314

12,231
17,58522,453

1,627

1,275

4,461

29,816

3,623
19,367

469
2,684

605
1,480

127
792

4,824
24,32322,990

3,153

2,085

919

29,14745,443

4,780

3,360

5,380

58,963Australia
Certificates of deposit
Term deposits

Overseas
Certificates of deposit
Term deposits

Total136 I financial report

FINANCIAL INFORMATION
3: VOLUME AND RATE ANALYSISThe 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 the relationship of the absolute dollar amounts of each change to the total.

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
Change in interest income
Intragroup elimination

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
New ZealandOverseas 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 interest expense
Intragroup elimination

Change in net interest income

Volume$m2004 over 2003
Change due to
Rate
$m

Total
$m

Volume
$m

7
106
6

1
8
(11)

8
114
(5)

42
68
43

46
9
(26)

1,320
2,146
(102)

2003 over 2002
Change due to
Rate
$m

Total
$m

(10)
1
(9)

5
(4)
(12)

(5)
(3)
(21)

88
77
17

47
17
15

(5)
1
(19)

42
18
(4)

310
(82)
20

1,630
2,064
(82)

949
176
(84)

41
98
(40)

990
274
(124)

(6)
13
(75)

28
(23)
62

22
(10)
(13)

2
–
14

86
(37)
(53)

88
(37)
(39)

17

8

25

7

(18)

(11)

3,585

350

3,935

1,125

43

1,168

(17)

(8)

(25)

(7)

18

11

3,568

342

3,910

1,118

61

1,179

282
557
(45)

142
11
5

424
568
(40)

205
94
(10)

23
20
(71)

228
114
(81)

26
97
–

47
36
–

73
133
–

23
4
(1)

11
(1)
(3)

34
3
(4)

115
174
–

104
(16)
–

219
158
–

117
9
(1)

54
11
(1)

171
20
(2)

28
44
(53)

8
9
19

36
53
(34)

1
4
(21)

(1)
2
(48)

–
6
(69)

31
383
20

25
–
(4)

56
383
16

64
–
18

10
–
(33)

74
–
(15)

24
6

10
(4)

34
2

27
21

(6)
(1)

21
20

522
90
(1)

42
(6)
–

564
84
(1)

210
6
(8)

45
1
(3)

255
7
(11)

187
(78)
18

64
64
(24)

251
(14)
(6)

135
(19)
(3)

(10)
18
(7)

125
(1)
(10)

(30)
141

(123)
37

(153)
178

20
(27)

(14)
10

6
(17)

2,538

446

2,984

868

6

874

(17)

(8)

(25)

(7)

18

11

2,521

438

2,959

861

24

885

1,047

(96)

951

257

37

294

financial report I 137

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 transactions of the Group are substantially with other banks.
2004
Loans andSpecific
provision
advances1$m$m

Loans andadvances1$mSpecific
provision
$m

4,592
3,346
3,660
3,548
126
2,667
4,734
19,492
2,368
81,771
7,626
6,550

26
4
7
5
–
1
26
24
3
8
21
84

3,829
2,632
2,632
4,966
51
2,613
5,366
15,648
1,767
69,660
6,821
5,335

71
4
23
5
–
2
5
23
4
11
54
65

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

140,480

209

121,320267

102,538

211

10,551
931
968
3,288
461
604
4,682
2,594
721
35,303
2,233
5,998

43
4
3
9
–
3
21
4
9
6
9
64

2,756
323
534
1,516
274
609
3,654
1,771
472
12,759
1,741
5,058

12
1
5
5
–
–
17
19
1
4
9
144

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

68,334175

31,467217

32,811

374

208,814384

152,787484

135,349

585

2003

2002
Loans andSpecific
provision
advances1$m$mAustralia
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

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

138 I financial report

FINANCIAL INFORMATION
4: CONCENTRATIONS OF CREDIT RISK (CONTINUED)
2001

2000

Loans andadvances1$mSpecific
provision$m

Loans andadvances1$mSpecific
provision
$m

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

92,455303

89,020

260

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

34,235

197

30,612449

126,690500

119,632

709

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

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 report I 139

FINANCIAL INFORMATION
5: DOUBTFUL DEBTS – INDUSTRY ANALYSIS
2004
$m

2003
$m

2002
$m

2001
$m

2000
$m

Balance at start of year
Adjustment for exchange rate fluctuations
Acquisition of provisions
Bad debts written off (refer (i) below)
Charge to statement of financial performance
Recoveries (refer (ii) below)
Other1

2,018
51
273
(680)
632
82
–

2,081
(98)
–
(640)
614
61
–

1,886
(28)
–
(697)
860
60
–

2,082
32
–
(834)
531
75
–

2,302
37
–
(539)
502
46
(266)

Total provisions for doubtful debts

2,376

2,018

2,081

1,886

2,082

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

(86)
(4)
(5)
–
(2)
(15)
(203)
(2)
(8)
(38)
(105)

(4)
(11)
(3)
(9)
(22)
(10)
(177)
(10)
(11)
(42)
(15)

(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)

Other

(212)

(326)

(229)

(326)

(264)

Total write-offs

(680)

(640)

(697)

(834)

(539)

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

–
1
–
1
2
–
46
3
1
2
2

2
1
1
1
2
6
24
3
1
3
–

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

Other

24

17

12

26

12

Total recoveries

82

61

60

75

46

Net write-offs

(598)

(579)

(637)

(759)

(493)

Ratio of net write-offs to average loans and acceptances

0.3%

0.4%

0.4%

0.5%

0.4%

i) Total write-offs by industry
Australiaii) Total recoveries by industry
Australia

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

140 I financial report

FINANCIAL INFORMATION
6: SHORT TERM BORROWINGSThe Group’s short-term borrowings comprise commercial paper, as well as unsecured notes issued by subsidiary borrowing corporations withan original term to maturity of less than one year. The Group has commercial paper programs in the United States, where it issues paper
through ANZ (Delaware) Inc., and in Europe and Asia, where the Group issues paper direct.
2004
$m

2003
$m

2002
$m

Commercial paper – ANZ (Delaware) Inc.
Commercial paper – otherUnsecured notes
Weighted average interest rate at end of year

7,068
11,712
–

6,981
5,458
–

1,654
3,963
12

Commercial paper – ANZ (Delaware) Inc.
Commercial paper – otherUnsecured notes
Maximum amount outstanding at any month end during year

1.68%
5.41%
–

1.07%
4.76%
–

1.85%
4.92%
6.22%

Commercial paper – ANZ (Delaware) Inc.
Commercial paper – otherUnsecured notes
Average amount outstanding during year

7,068
18,387
–

6,988
7,407
7

5,541
5,647
29

Commercial paper – ANZ (Delaware) Inc.
Commercial paper – otherUnsecured notes
Weighted average interest rate during year

6,485
12,588
–

4,740
5,216
7

3,641
3,888
14

Commercial paper – ANZ (Delaware) Inc.
Commercial paper – otherUnsecured notes

1.14%
5.49%
–

1.22%
4.83%
5.85%

2.00%
4.57%
5.54%

Balance at end of yearfinancial report I 141

GLOSSARY
Asia Pacific provides primarily retailbanking services in the Pacific Region andAsia, including ANZ's share of PT Panin
Bank in Indonesia; this business unit
excludes Institutional and Corporatetransactions included in the geographic
results for Asia Pacific which are included
in Institutional results.
Corporate Australia incorporates
Corporate Banking Australia, BusinessBanking and Small Business Banking inAustralia.
> Small Business Banking in Australia
provides business banking services tometropolitan-based small businesses,with business banking funds undermanagement of up to $50,000.
> Business Banking in Australia provides
a full range of banking services tometropolitan-based small to medium
businesses, with turnover up to$10 million and business banking funds
under management of more than $50,000.
> Corporate Banking Australia manages
customer relationships and develops
financial solutions for medium-sizedbusinesses, with a turnover of$10 million to $150 million.
Economic loss provisioning (ELP) charge
is determined based on the expected
average annual loss of principal over the
economic cycle for the current risk profileof 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 byeliminating the impact of earnings oneach business unit’s book capital andattributing earnings on the business unit’s
risk adjusted capital. This enhances
comparability of business unit
performance. Geographic results are notequity standardised.
Esanda and UDC comprises Esanda
Finance Corporation Limited and UDC
Finance Corporation Limited. They provide
vehicle and equipment finance and rental
services, operating in Australia as Esanda
and Esanda FleetPartners, and in New
Zealand as UDC and Esanda FleetPartners.

Group Centre provides support to theother segments in the areas of People
Capital, Risk Management, Finance,
Operations, Technology, Strategy,
Administration and Treasury.
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.
ING Australia (INGA), the joint venture
between the Group and ING Group,
provides integrated manufacture anddistribution of wealth creation,
management and protection products andservices aligned to the Group's
distribution and the open market.
Institutional is a segment encompassing
businesses that provide a full range offinancial services to the Group's largest
corporate and institutional customers.
> Institutional Banking - Manages
customer relationships and develops
financial services solutions and strategies
for large businesses with a turnover
greater than $150 million in Australia and
New Zealand and, through corporateclients where the Group has an existingcustomer relationship, in the United
Kingdom, United States and Asia.
> Trade and Transaction Services Provides cash management, trade finance,international payments, clearing andcustodian services principally to corporate
and institutional customers.
> Markets - Provides origination,
underwriting, structuring, risk
management, advice and sale of credit
and derivative products, foreign exchange
and commodity trading and sales-related
services, globally.
> Corporate and Structured Financing Provides complex financing andadvisory services, structured financial
products, leasing, private equity, project
and leveraged finance and infrastructure
investment to ANZ's corporate,institutional, and small
business customers.

Net advances include gross loans andadvances and acceptances less income
yet to mature and provisions (for both asat and average volumes).
Net interest average margin is net interest
income as a percentage of averageinterest earning assets. Non-assessableinterest 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-assessableinterest income is grossed up to theequivalent before tax amount for the
purpose of these calculations.
Net non-interest bearing items, which arereferred to in the analysis of interest
spread and net interest average margin,
includes shareholders’ equity, provisions
for doubtful debts, and deposits notbearing interest and other liabilities notbearing interest, offset by premises andequipment and other non-interest earning
assets. Non-accrual loans are included
within interest bearing loans, advancesand bills discounted.
Net specific provision is the transfer fromthe general provision to the specificprovision (representing new andincreased specific provisions less specificprovision releases on impaired assets)less recoveries.
New Zealand Business comprises the ANZ
businesses of NZ Banking, Mortgages andConsumer Finance, and all of thebusinesses of National Bank of New
Zealand (NBNZ) which was acquiredon 1 December 2003.
The ANZ businesses of Institutional and
UDC that operate in New Zealand throughglobal lines are excluded from New
Zealand Business, although these
activities are included in the equivalent
NBNZ businesses.
Accordingly, New Zealand Businessprovides full service banking operations in
the personal, corporate, business andrural sectors in New Zealand. The wealthmanagement sector is serviced by Private
Banking, ING New Zealand, and the NBNZ
funds management business. Life
insurance and fire and general insurance
services are also provided through NBNZ.

142 I financial report

Operating expenses exclude the charge
for doubtful debts.
Operations, Technology and Shared
Services comprises the Group's core
support units responsible for operating
the Group's global technology platforms,
development and maintenance ofbusiness applications, information
security, the Group's payments back-officeprocessing, and the provision of otheressential shared services to the Group,
including property, human resources
operations, procurement and outsourcing.
Overseas includes the results of all
operations outside Australia, except if
New Zealand is separately shown.
Overseas markets includes the resultsof operations in the UK, Europe, Asia,
Pacific and the Americas. The Group’s
geographic segments are Australia, New
Zealand and Overseas markets.
Personal comprises Personal Banking
Distribution (including Rural Banking andPrivate Banking), Banking Products,
Mortgages and Cards and Merchant Services.
> Personal Banking Distribution - provides
a full range of banking and financial
planning services to personal customers
across Australia, and to small businessand agricultural customers in rural
Australia.
> Banking Products - manufactures
deposit, transaction accounts andmargin lending products.
> Mortgages - provides mortgage financesecured by residential real estate.
> Cards and Merchant Services - provides
consumer and commercial credit cards,
ePayment products, personal loans, andmerchant payment and ATM facilities.

Service transfer pricing is used to allocate
services that are provided by central areas
to each of its business units. The objectiveof service transfer pricing is to remove
cross-subsidies between business units,
and ensure each business accounts forthe cost of the services it uses. Transfer
pricing arrangements are reviewed
periodically. The basis of pricing forinternal services varies from cost recovery,
to market equivalent. Changes in transfer
pricing arrangements in current periods
are, to the extent possible, reflected inprior period comparatives to assist
comparability. NBNZ has not yet adopted
full transfer pricing.
The Statement of Financial Performance ofeach business unit includes net interbusiness unit fees and net inter business
unit expenses. This treatment is
consistent with the Group's strategy ofmanaging along specialist business lines.
Net inter business unit fees includes intragroup receipts or payments for salescommissions. A product business (forexample, Mortgages) will pay a
distribution channel (for example,
Personal Banking) for product sales.
Both the payment and receipt are shownas net inter business unit fees. Net interbusiness unit expenses consist of thecharges made to business units for theprovision of support services. Examplesof services provided include technology
and payments, risk management, financeand human resources management. Bothpayments by business units and receipts
by services providers are shown as net
inter business unit expenses.
The results of the segments may include
business units and a support unit. The
services provided by the support unit areallocated to the business units. As aresult of this allocation, the sum of
individual profit and loss line items of thebusiness units may not equal thecorresponding line item in the Statementof Financial Performance of the segment.

Total advances include gross loans
and advances and acceptances lessincome yet to mature (for both as at
and average volumes).
Treasury is the banker to all ANZ
businesses charged with providing
cashflow support, ensuring liquidity,
managing interest rate risk and providing
capital to the businesses.
Unproductive facilities comprise certain
facilities (such as standby letters of credit,
bill endorsements, documentary letters ofcredit and guarantees to third parties,
undrawn facilities to which the Group isirrevocably committed and market related
exposures) where the customer status isdefined as non-accrual.

financial report I 143

ALPHABETICAL INDEX
Accounting Policies
29
Associates
89
Auditors’ Report
128
Average Balance Sheetand Related Interest
67
Bonds and Notes
60
65
Capital Adequacy
Certificates of Deposit andTerm Deposit Maturities
135
Commitments
91
137
Concentrations of Credit Risk
Contingent Liabilities, Contingent Assetand Credit Related Commitments 92
Controlled Entities
88
129
Critical Accounting Policies
Cross Border Outstandings
135
Customers’ Liabilities for Acceptances 52
Deferred Tax Assets
53
Deposits and Other Borrowings
57
Derivative Financial Instruments
77
Directors’ Declaration
127
Directors and Specified Executives Related Party Transactions
105
Directors of Controlled Entitiesof the Company - Related
Party Transactions
107
Dividends
38
Doubtful Debts – Industry Analysis 139
Due from Other Financial Institutions 41
Due to Other Financial Institutions
57
Earnings Per Ordinary Share40
Employee Share and Option Plans
98
Equity Instruments Issued
to Employees
36
Events Since the Endof the Financial Year
126
Exchange Rates
123
35
Expenses
Fiduciary Activities
91
141
Glossary
54
Goodwill
49
Impaired Assets
Income34
37
Income Tax Expense
58
Income Tax Liabilities
73
Interest Sensitivity Gap
Interest Spreads and70
Net Interest Average Margins
89
Interests in Joint Venture Entities
International Financial
Reporting Standards
124
Investment Securities
43
83
Life Insurance
41
Liquid Assets
Loan Capital
61
Market Risk
71
Net Fair Value of Financial Instruments 75
46
Net Loans and Advances
Notes to the Statements of Cash Flows 86
Other Assets
54
Outside Equity Interests
64
58
Payables and Other Liabilities
Premises and Equipment
55
Provisions
59

Provisions for Doubtful Debts
51
Regulatory Deposits
52
36
Remuneration of Auditors
Remuneration Report
6
Risk Management
134
Securitisation
83
Segment Analysis
84
Share Capital
62
Shares in Controlled Entities,
Associates andJoint Venture Entities
53
Short Term Borrowings
140
Statements of Cash Flows
28
Statements of Changes
in Shareholders’ Equity
27
Statements of Financial Performance 25
26Statements of Financial Position
Superannuation Commitments
96
Trading Securities
42
Transactions with Associates andJoint Venture Entities Related Party Disclosures
107
US GAAP Reconciliation
108
Volume and Rate Analysis
136

144 I financial report

THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY

2004 ANZ financial report

australia and new zealandbanking group limited
abn 11 005 357 522
www.anz.com