A N Z N AT I O N A L B A N K L I M I T E D G R O U P     G e n e r a l D i s c l o s u r e S t a t e m e n t     3 0 S e p t e m b e r 2 0 0 7     N u m b e r 4 7

A N Z N AT I O N A L B A N K L I M I T E D G R O U P

General Disclosure Statement
for the year ended 30 September 2007

Number 47 Issued November 2007

ANZ National Bank Limited

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIESGENERAL DISCLOSURE STATEMENT for the year ended 30 September 2007

Contents

General Disclosures2

Summary of Financial Statements

3

Income Statements

4Statements of Recognised Income and Expenses

5

Balance Sheets

6

Cash Flow Statements

7

Notes to the Financial Statements

8 – 78

Directorate and Auditors

79 – 80

Conditions of Registration81 – 82

Credit Rating Information

83 – 84

Directors’ Statement
Audit Report
Index

85
86 – 87
88

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES	GENERAL DISCLOSURESThis Disclosure Statement has been issued in accordance with theRegistered Bank Disclosure Statement (Full and Half-Year – New Zealand
Incorporated Registered Banks) Order 2007 (‘the Order’).

otherwise) is deemed to trigger a default of the Ultimate Parent Bankin its obligations;•

In this Disclosure Statement unless the context otherwise requires:a) “Banking Group” means ANZ National Bank Limited and all its
subsidiaries; andb) any term or expression which is defined in, or in the manner prescribedby, the Registered Bank Disclosure Statement (Full and Half-Year –New Zealand Incorporated Registered Banks) Order 2007 shall havethe meaning given in or prescribed by that Order.
General Matters
The full name of the registered bank is ANZ National Bank Limited (‘theBank’) and its address for service is Level 14, ANZ Tower, 215–229
Lambton Quay, Wellington, New Zealand.
The Bank was incorporated under the Companies Act 1955 by virtue ofthe ANZ Banking Group (New Zealand) Act 1979 on 23 October 1979,
and was reregistered under the Companies Act 1993 on 13 June 1997.

•

the Board of the Ultimate Parent Bank in determining limits on
acceptable levels of exposure to the Bank should have regard to:•

the level of exposure that would be approved to third parties ofbroadly equivalent credit status. In this regard, prior consultation(and in cases approval) is required before entering exceptionallylarge exposures; and•the impact on the Ultimate Parent Bank’s capital and liquidity
position and its ability to continue operating in the event of a
failure by the Bank.

the level of exposure to the Bank not exceeding:•

50% on an individual exposure basis; and•150% in aggregate (being exposures to all similar regulated
entities related to the Ultimate Parent Bank)of the Ultimate Parent Bank’s capital base.
The immediate parent company of the Bank is ANZ Holdings (New
Zealand) Limited (incorporated in New Zealand). The immediate
parent company is owned by ANZ Funds Pty Limited (incorporated inAustralia).
The Ultimate Parent Bank is Australia and New Zealand Banking Group
Limited (‘ANZ’), which is incorporated in Australia, and its address forservice is 100 Queen Street, Melbourne, Australia.

Additionally, the Ultimate Parent Bank may not provide material financial
support in breach of the Australian Banking Act (1959). This requires theAustralian Prudential Regulatory Authority to exercise its powers andfunctions for the protection of a bank’s depositors and in the event of abank becoming unable to meet its obligations or suspending payment, theassets of the bank in Australia shall be available to meet that bank’s deposit
liabilities in Australia in priority to all other liabilities of the bank.

The Bank is wholly owned by its immediate parent company andultimately the Ultimate Parent Bank. The immediate parent company
has the power under the Bank’s Constitution to appoint any person as a
Director of the Bank either to fill a casual vacancy or as an additional
Director or to remove any person from the office of Director, from time
to time by giving written notice to the Bank. No appointment of a new
Director may occur unless the Reserve Bank of New Zealand confirmsthat it does not object to the appointment.

The Ultimate Parent Bank has not provided material financial support to
the Bank contrary to any of the above requirements.

Nature of Business
The principal activities of the Banking Group during the year were retail,corporate and rural banking, mortgage lending, asset and general finance,international and investment banking, nominee and custodian services.
Life insurance and funds management activities are carried out throughthe ING New Zealand joint venture.

The Banking Group has received amended tax assessments from the New
Zealand Inland Revenue Department (‘IRD’) in respect of its review ofcertain structured finance transactions. The Banking Group is confident,
based on independent tax and legal advice obtained, that its tax treatmentof these transactions is correct and disagrees with the IRD’s position.

With the sale of Truck Leasing Limited, the Banking Group no longer has
significant operating lease activities.
Material Financial Support
In accordance with the requirements issued by the Australian Prudential
Regulatory Authority pursuant to the Prudential Standards, Australia
and New Zealand Banking Group Limited, as the Ultimate Parent Bank,
may not provide material financial support to the Bank contrary to thefollowing:•

the Ultimate Parent Bank should not undertake any third party dealings
with the prime purpose of supporting the business of the Bank;•

the Ultimate Parent Bank should not hold unlimited exposures (should
be limited as to specified time and amount) in the Bank (e.g. notprovide a general guarantee covering any of the Bank’s obligations);•

the Ultimate Parent Bank should not enter into cross default clauses
whereby a default by the Bank on an obligation (whether financial or

Pending Proceedings or Arbitration
Other than disclosed in the Disclosure Statement, there are no pending
proceedings or arbitration concerning any member of the Banking Group
that may have a material adverse effect on the Bank or the Banking Groupas at the date of the General Disclosure Statement.

The Commerce Commission has brought proceedings under the Commerce
Act 1986 against Visa, MasterCard and all New Zealand issuers of Visa
and MasterCard credit cards, including the Bank. Several major New
Zealand retailers have also issued proceedings. The Bank is defending theproceedings. At this stage any potential liabilities cannot be assessed.
Further details on pending proceedings or arbitration are set out in Note 41
Contingent Liabilities and Credit Related Commitments.
Other Material Matters
There are no matters relating to the business or affairs of the Bank andthe Banking Group which are not contained elsewhere in the General
Disclosure Statement and which would, if disclosed, materially adversely
affect the decision of a person to subscribe for debt securities of which the
Bank or any member of the Banking Group is the issuer.
Guarantors
The material obligations of the Bank are not guaranteed.

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES	SUMMARY OF FINANCIAL STATEMENTS

Continuing operations
Interest income
Interest expense

NZ IFRS
30/09/2007$mConsolidated		
NZ IFRS1, 2
NZ IFRS1, 2
30/09/2006
30/09/2005$m$mPrevious
GAAP3
30/09/2004$mPrevious
GAAP
30/09/2003
$m

8,309
6,059

7,206
5,077

6,009
4,069

4,481
2,797

1,980
1,220

Net interest income
Other operating income

2,250
861	

2,129
802

1,940
794

1,684
751

760
453

Net operating income
Operating expenses

3,111	
1,331	

2,931
1,323

2,734
1,312

2,435
1,265

1,213
559

Profit before provision for credit impairment and income tax
Collective provision charge (credit)
Individual provision charge4

1,780
20
54

1,608
(10)
28

1,422
121
–

1,170
133
–

654
61
–

74

18

121

133

61

Profit before income tax
Income tax expense

1,706
614

1,590
523

1,301
398

1,037
357

593
176

Profit after income tax from continuing operations
Discontinued operation
Profit from discontinued operation (net of income tax)

1,092

1,067

903

680

417

76

5

14

–

–

Profit after income tax
Retained profits at beginning of the year
Adjustment on adoption of NZ IFRS on 1 October 2004
Adjustment on adoption of NZ IAS 39 on 1 October 2005

1,168
2,235
–
–

1,072
2,003
–
61

917
1,438
4
–

680
958
–
–

417
841
–
–

Total available for appropriation
Actuarial gain (loss) on defined benefit schemes after tax
Appropriation
Interim ordinary dividends paid

3,403
2

3,136
(1)

2,359
4

1,638
–

1,258
–

(728)

(900)

(360)

(200)

(300)

Retained profits at end of the year

2,677

2,235

2,003

1,438

958

Consolidated		
NZ IFRS1, 2
NZ IFRS1, 2
30/09/2006
30/09/2005
$m
$m
159
220

Previous
GAAP3
30/09/2004$m
123

Previous
GAAP
30/09/2003$m
25

Provision for credit impairment

NZ IFRS
30/09/2007$m121	

Total impaired assets(on-balance sheet and off-balance sheet)
Total assets
107,787
95,81485,501
74,21229,362
Total liabilities
99,08487,581
77,55566,831
27,998Equity
8,703
8,233
7,946
7,381
1,364
The amounts included in this summary have been taken from the audited financial statements of the Banking Group.
1
On 1 October 2005, the Banking Group adopted New Zealand equivalents to International Financial Reporting Standards (‘NZ IFRS’). In accordancewith NZ IFRS, comparative information was restated using the new accounting standards from 1 October 2004. As permitted by the transitional provisions
set out in NZ IFRS 1 First-time Adoption of New Zealand Equivalents to International Financial Reporting Standards, management has elected not torestate comparative information for the adoption of NZ IAS 32 Financial Instruments: Disclosure and Presentation (NZ IAS 32) and NZ IAS 39 Financial
Instruments: Recognition and Measurement (NZ IAS 39). Refer to Note 52 Explanation of Transition to NZ IFRS in the 30 September 2006 General
Disclosure Statement for an explanation of the Banking Group’s transition to NZ IFRS and the adjustments required to comply with NZ IFRS.
2
Truck Leasing Limited has been classified as a discontinued operation for the current year and comparative years ending 30 September 2006 and 30
September 2005. For further details, refer to Note 10 Discontinued Operations.
3
On 1 December 2003, the Banking Group acquired all of the shares of NBNZ Holdings Limited (‘NBNZ Group’). The results and financial position
of NBNZ Group have been included in the Banking Group since that date. For further details, refer to Note 14 Acquisition of Subsidiaries in the 30
September 2004 General Disclosure Statement.
4
The Reserve Bank of New Zealand’s guidelines require the Banking Group to show the individual provision charge to profit as the ‘impaired asset
expense’. Prior to adopting NZ IFRS on 1 October 2005, under the Banking Group’s Bad and Doubtful Debts policy, the required individual provision
was not charged to profit, but was transferred from the collective provision balance. The Banking Group’s provision for credit impairment, which
represented the expected average annual loss on principal over the economic cycle for the lending portfolio, was credited to the collective provision.
Under NZ IFRS, there is no longer a transfer between the collective and individual provisions. Further detail on the provision for credit impairment is set
out in Note 15 Provision for Credit Impairment.

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES	INCOME STATEMENT for the year ended 30 September 2007
		
NoteConsolidated
30/09/2007 30/09/2006$m$m

Parent30/09/2007 30/09/2006$m$m

Continuing operations
Interest income

4

8,309

7,206

8,038

6,892

Interest expense

5

6,059

5,077

6,542

5,589

2,250

2,129

1,496

1,303

Net interest income
Other operating income

4

837

780

1,995

885

Share of profit of equity accounted associates and jointly
controlled entities

16

24

22

22

22

3,111	

2,931

3,513

2,210

Operating expenses

5	1,331	

1,323

1,283

1,273

Profit before provision for credit impairment and income tax

	1,780

1,608

2,230

937

Provision for credit impairment

15

74

18

75

16

Profit before income tax

	1,706

1,590

2,155

921

Income tax expense

6

614

523

379

310

Profit after income tax from continuing operations

	1,092

1,067

1,776

611

Discontinued operation
Profit from discontinued operation (net of income tax)

10

76

5

–

–

Profit after income tax

	1,168

1,072

1,776

611

Net operating income

The notes on pages 8 to 78 form part of and should be read in conjunction with these financial statements.

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES	STATEMENT OF RECOGNISED INCOME AND EXPENSES for the year ended 30 September 2007
		
Note
Available-for-sale revaluation reserve:
Valuation (loss) gain taken to equity
Cumulative gain transferred to the income   statement on sale of financial assets

Consolidated
30/09/2007 30/09/2006$m$m

Parent30/09/2007 30/09/2006
$m
$m

30

(1)

3

(1)

3

30

(3)

–

(3)

–

30

67
(24)

29
(11)

67
(24)

29
(11)

30, 51	

3

(2)

3

(2)

Income tax on items recognised directly in equity

(12)

(5)

(12)

(5)

Net income recognised directly in equity

30

14

30

14

Profit after income tax

	1,168

1,072

1,776

611

Total recognised income and expenses for the year

	1,198

1,086

1,806

625

Cash flow hedging reserve:
Valuation gain taken to equity
Transferred to income statement
Actuarial gain (loss) on defined benefit schemes

The notes on pages 8 to 78 form part of and should be read in conjunction with these financial statements.

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES	BALANCE SHEET as at 30 September 2007
		
Note
AssetsLiquid assets
Due from other financial institutions
Trading securities
Held for sale assets
Derivative financial instruments
Available-for-sale assets
Net loans and advances
Due from subsidiary companies
Shares in controlled entities, associates andjointly controlled entities
Current tax assets
Other assets
Deferred tax assets
Premises and equipment
Goodwill and other intangible assets

Consolidated
30/09/2007 30/09/2006$m$m

Parent30/09/2007 30/09/2006
$m
$m

7
4,807
8
3,563
9	1,877
10–
11	
4,711	
12
48
13, 14, 15
87,878
–

2,698
5,617
1,596
538
2,020
359
78,155–

4,807
3,101	
1,877
–
4,705
38
84,044
1,585

2,698
5,111
1,596
–
2,019
349
74,453
1,505

16
206
	112
17	1,045
18	11	
19
232
20
3,297

177
114
890
122
240
3,288

7,683
248
920
–
54
3,247

7,684
242
797
105
59
3,239

	107,787

95,814112,30999,857

21	
22

3,170
70,030–11	
4,924
23	1,351	
10–
24–
25	16526	14,607
27
2,775
28
2,062

3,987
63,176
–
1,997
1,216
53
–
159
12,468
2,720
1,805

1,686
58,51432,942
4,896
988
–
7
151	
561	
2,775
2,062

2,828
53,59428,648
1,992
991
–
–
155
475
2,720
1,805

Total liabilities

99,08487,581

104,582

93,208

Net assets

8,703

8,233

7,727

6,649

5,943
83
2,677

5,943
55
2,235

5,943
83
1,701	

5,943
55
651

8,703

8,233

7,727

6,649

Total assets
Liabilities
Due to other financial institutions
Deposits and other borrowings
Due to subsidiary companies
Derivative financial instruments
Payables and other liabilities
Held for sale liabilities
Deferred tax liabilities
Provisions
Bonds and notes
Related party funding
Loan capital

EquityOrdinary share capital
Reserves
Retained profits
Total equity

29
30
30

For and on behalf of the Board of Directors:

Sir Dryden Spring
Director
5 November 2007

The notes on pages 8 to 78 form part of and should be read in conjunction with these financial statements.

Graham Hodges
Director
5 November 2007

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES	CASH FLOW STATEMENT for the year ended 30 September 20071
		
NoteCash flows from operating activities
Interest received
Dividends received
Fees and other income received
Interest paid
Operating expenses paid
Income taxes paid

Consolidated
30/09/2007 30/09/2006$m$m

Parent30/09/2007 30/09/2006
$m
$m

7,892
3
926
(5,486)(1,254)
(513)

6,738
1
979
(4,669)(1,276)
(466)

7,739
1,217
715
(6,027)(1,226)
(285)

6,476
153
800
(5,229)(1,230)
(285)

1,568

1,307

2,133

685

Net changes in operating assets and liabilities:
Decrease (increase) in due from other financial institutions – term
Increase in trading securities(Increase) decrease in derivative financial instruments
Decrease in available-for-sale assets
Increase in loans and advances
Increase in due from subsidiary companies
Increase (decrease) in due to subsidiary companies(Increase) decrease in other assets
Increase (decrease) in due to other financial institutions – term
Increase in deposits and other borrowings
Decrease in payables and other liabilities

469
(73)
(1,136)
312(10,149)––(69)
	1,141	
6,857
(125)

(128)
(576)
330
957
(8,607)
–
–
117
(386)
2,883
(375)

446
(73)
(1,114)312(9,993)
(80)
2,593
(27)
11	
4,573
(194)

(302)
(576)
301
967
(8,610)(75)(1,688)
123
(107)
5,301
(399)

Net cash flows used in operating activities

45(1,205)(4,478)(1,413)(4,380)Cash flows from investing activities
Proceeds from sale of shares in associates and jointly controlled entities
Proceeds from sale of subsidiary companies2
Proceeds from sale of premises and equipment
Purchase of shares in associates and jointly controlled entities
Purchase of shares in subsidiary companies
Purchase of intangible assets
Purchase of premises and equipment

5
585
	17
(8)
–
(17)
(51)

12
–
87
(7)
(5)
(10)
(228)

6
–
2
–
(25)
(16)
(13)

–
1,091
57
(5)
(1,235)
(9)
(25)

531	

(151)

(46)

(126)

Cash flows from financing activities
Proceeds from bonds and notes
Redemptions of bonds and notes
Proceeds from loan capital
Redemptions of loan capital
Increase in due to subsidiary companies – term
Increase in related party funding
Dividends paid

4,173
(684)
800
(550)
–
55
(728)

6,337
(663)
400
(100)
–
70
(900)

86
–
800
(550)
3,403
55
(728)

312
(482)
400
(100)
5,844
70
(900)

Net cash flows provided by financing activities

3,066

5,144

3,066

5,144

Net cash flows used in operating activities
Net cash flows provided by (used in) investing activities
Net cash flows provided by financing activities(1,205)531	
3,066(4,478)
(151)
5,144

(1,413)(46)
3,066(4,380)
(126)
5,144

Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of the year

2,392
2,728

515
2,213

1,607
3,865

638
3,227

Cash and cash equivalents at end of the year

5,120

2,728

5,472

3,865

Reconciliation of cash and cash equivalents to the balance sheets
Liquid assets
Due from other financial institutions – less than 90 days
Due to other financial institutions – less than 90 days

4,807
2,323
(2,010)

2,698
3,998
(3,968)4,807
2,321	
(1,656)

2,698
3,976
(2,809)Total cash and cash equivalents

5,120

2,728

5,472

3,865

Cash flows from operating profits before changes in operating assets and liabilities

Net cash flows provided by (used in) investing activities

The notes on pages 8 to 78 form part of and should be read in conjunction with these financial statements.
1
The cash flow statement has not been restated for the classification of Truck Leasing Limited (‘TLL’) as a discontinued operation as at 30 September
2006. Disclosure of the net cash flows attributable to the operating, investing and financing activities of the discontinued operations are presented in Note
10 Discontinued Operations.
2
The cash proceeds from the sale of controlled entities includes $438 million relating to the repayment of TLL’s unsecured bank borrowings with UDC
Finance Limited by the acquiree.

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES	NOTES TO THE FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES(i)

Basis of preparation
These financial statements have been prepared in accordancewith the requirements of the Companies Act 1993, the Financial
Reporting Act 1993 and the Registered Bank Disclosure Statement(Full and Half-Year – New Zealand Incorporated Banks) Order2007 (the ‘Order’). The parent company’s financial statements are
for ANZ National Bank Limited (the ‘Bank’) as a separate entity
and the consolidated financial statements are for the ANZ National
Bank Limited Group (the ‘Banking Group’ and reporting entity),
which includes subsidiaries, associate companies and jointly
controlled entities as disclosed in Note 47 Controlled Entities,
Associates and Interests in Jointly Controlled Entities.
		
These financial statements have also been prepared in accordancewith New Zealand Generally Accepted Accounting Principles.
They comply with New Zealand equivalents to International
Financial Reporting Standards and other applicable Financial
Reporting Standards, as appropriate for profit-oriented entities.
Compliance with NZ IFRS ensures that the financial statements
also comply with International Financial Reporting Standards(‘IFRS’).
These financial statements were authorised for issue by the Boardof Directors on 5 November 2007.
(ii)

Presentation currency and rounding
The amounts contained in the financial statements are presented inmillions of New Zealand dollars, unless otherwise stated.

For further discussion on the judgements and estimates madeby the Banking Group, in the process of applying its accounting
policies, that have the most effect on the amounts recognised in
the financial statements refer to Note 2 Critical Estimates andJudgements Used in Applying Accounting Policies. Such estimates
may require reviewing in future periods.
(vi) Consolidation
These financial statements consolidate the financial statements of
ANZ National Bank Limited (the ‘Bank’) and its subsidiaries (the‘Banking Group’).
Subsidiaries
Control means the power to govern, directly or indirectly, decision
making in relation to the financial and operating policies of anentity so as to obtain benefits from its activities.
Where subsidiaries have been sold or acquired during the year,
their operating results have been included to the date control ceases
or from the date control is transferred to the Banking Group.

The accounting policies set out below have been consistently
applied to all years presented in these financial statements.

The purchase method of accounting is used to account for theacquisition of subsidiaries. The cost of acquisition is measured
as the fair value of the assets given, equity instruments issued
and liabilities incurred or assumed at the date of exchange, plus
costs directly attributable to the acquisition. Identifiable assets
acquired and liabilities and contingent liabilities assumed in abusiness combination are measured initially at their fair values atacquisition date. The excess of the cost of acquisition over the fairvalue of the Banking Group’s share of the identifiable net assets
acquired is recorded as goodwill. If the cost of acquisition is lessthan the fair value of the Banking Group’s share of the net assetsof the subsidiary acquired, the difference is recognised directly in
the income statement.

The Banking Group has not early adopted NZ IFRS 7: Financial
Instruments: Disclosures (‘NZ IFRS 7’) issued in November 2005.
This standard is effective for annual accounting periods beginningon or after 1 January 2007. Application of NZ IFRS 7 will resultin changes to disclosures about the risks arising from financial
instruments. The initial application of NZ IFRS 7 is not expected
to have an impact on the financial results.

Inter-company transactions, balances and unrealised gains
on transactions between group companies are eliminated on
consolidation. Unrealised losses are also eliminated unless thetransaction provides evidence of an impairment of the asset
transferred. The accounting policies of the subsidiary have beenchanged where necessary to ensure consistency with the policies
adopted by the Banking Group.

The Banking Group has not early adopted NZ IFRS 8: Operating
Segments issued in December 2006. This standard is effective forannual accounting periods beginning on or after 1 January 2009.

Associates and joint ventures
Associates are all entities over which the Banking Group hassignificant influence but not control, generally accompanying
a shareholding of between 20% and 50% of the voting rights.
Joint ventures are entities over which the Banking Group has
joint control. Joint control is the contractually agreed sharing ofcontrol and exists only when the strategic financial and operating
decisions relating to the activities of the joint venture require theunanimous consent of the parties sharing control. The Banking
Group adopts the equity method of accounting for associates
and jointly controlled entities. The Banking Group’s investment
in equity accounted associates and jointly controlled entities is
initially recognised at cost and includes any attributable goodwill(net of accumulated impairment losses) identified on acquisition.

(iii) Changes in accounting policies / adoption of NZ IFRSThe Ultimate Parent Company, Australia and New Zealand
Banking Group Limited, adopted the Australian equivalents to
IFRS for the reporting period commencing 1 October 2005. Hence,from this date, the Banking Group elected to prepare financial
statements using the New Zealand equivalents to International
Financial Reporting Standards.

(iv) Measurement base
The financial statements have been prepared on a going concern
basis in accordance with historical cost concepts except thatthe following assets and liabilities are stated at their fair value:
derivative financial instruments including the fair value of any
applicable underlying exposure, assets treated as available for sale,financial instruments held for trading, certain financial liabilities
designated at fair value through profit or loss, certain assets andliabilities designated as part of fair value hedging arrangements
and defined benefit scheme assets and liabilities.
(v)

reported amounts and the application of policies. The estimatesand associated assumptions are based on historical experience andvarious other factors that are believed to be reasonable. Actual
results may differ from these estimates.

Accounting estimates
The preparation of the financial statements requires the use ofmanagement judgement, estimates and assumptions that affectANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES	NOTES TO THE FINANCIAL STATEMENTS (continued)
1. ACCOUNTING POLICIES (continued)
The Banking Group’s share of the post acquisition results ofassociates and jointly controlled entities is included in the
consolidated income statement and its share of post-acquisition
movements in reserves recognised in reserves. Shares in associates
and jointly controlled entities are stated in the consolidated balance
sheet at cost plus the Banking Group’s share of post acquisition
net assets. Unrealised gains on transactions between the Banking
Group and its associates and jointly controlled entities are
eliminated to the extent of the Banking Group’s interest in theentity. Unrealised losses are also eliminated unless the transaction
provides evidence of an impairment of the asset transferred. If an
associate or jointly controlled entity uses accounting policies otherthan those used by the Banking Group for like transactions andsimilar events, adjustments are made to conform the associate or
jointly controlled entity’s policy to those of the Banking Group in
applying the equity method.
Interests in associates and jointly controlled entities are reviewed ateach reporting date for impairment. Any impairment is recognisedin the income statement.
All significant activities of the Banking Group, with the exceptionof the ING New Zealand Joint Venture, are operated throughwholly owned and controlled entities.
The Banking Group may invest in or establish special purpose
entities to enable it to undertake specific types of transactions.
Where the Banking Group controls such vehicles, they are
consolidated into the Banking Group’s financial results.
(vii) Foreign currency
Functional and presentation currency
Items included in the financial statements of each of the Banking
Group’s entities are measured using the currency of the primaryeconomic environment in which the entity operates (the functional
currency). The Banking Group’s financial statements are presented
in New Zealand dollars, which is the Bank’s functional andpresentation currency.

The effective interest method calculates the amortised cost ofa financial asset or financial liability and allocates the interest
income or interest expense, including any fees and directly relatedtransaction costs that are an integral part of the effective interest
rate, over the expected life of the financial asset or liability.
Income and expense on the financial asset or financial liability isrecognised on an effective yield basis in proportion to the amountoutstanding over the period to maturity or repayment.
Loan commitment fees (together with related direct costs), aredeferred and recognised as an adjustment to the effective yield on
the loan once drawn or immediately to the income statement for
expired commitments.
Fees and commissions payable to brokers in respect of originating
lending business, where these are direct and incremental costs
related to the issue of a financial instrument, are deferred andrecognised in interest income as part of the effective interest rate.
(x)

Fee and commission income
Fees and commissions that are integral to the effective rate of afinancial asset or liability are included in the determination of theeffective interest rate.
Fees and commissions that relate to the execution of a significant act(for example, advisory services, placement fees and underwritingfees) are recognised when the significant act has been completed.
Fees charged for providing ongoing services that represent therecoupment of the costs of providing service (for example,
maintaining and administering existing facilities) are recognised
as revenue over the period the service is provided.

(xi) Offsetting of income and expenses
Income and expenses are not offset unless required or permitted
by an accounting standard. This generally arises in the following
circumstances:•

Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing on the date of thetransaction. Foreign exchange gains and losses resulting from (i)the settlement of such transactions, and (ii) the translation at yearend exchange rates of monetary assets and liabilities denominatedin foreign currencies, are recognised in the income statement,
except when deferred in equity as qualifying cash flow hedges.

•••

Translation differences on non-monetary items held at fair value
through profit or loss, are reported as part of the fair value gain orloss in the income statement.
(viii) Revenue and expense recognition
Revenue is recognised to the extent that it is probable that
economic benefits will flow to the Banking Group and that revenue
can be reliably measured. Expenses are recognised in the income
statement on an accruals basis.
(ix) Interest income and interest expense
Interest income and interest expense are recognised in the income
statement as they accrue, using the effective interest method.

•

Where transaction costs form an integral part of the effective
interest rate of a financial instrument which is measured atamortised cost, these are offset against the interest income
generated by the financial instrument;
where gains and losses relating to fair value hedges areassessed as being effective;
where gains and losses from a group of similar transactions
are reported on a net basis such as foreign exchange gains andlosses;where amounts are collected on behalf of third parties, where
the Banking Group is, in substance, acting as an agent only;or
where costs are incurred on behalf of customers from whom
the Banking Group is reimbursed.

(xii) Recognition and derecognition of financial assets and financial
liabilities
The Banking Group recognises a financial asset or liability on its
balance sheet when, and only when, the Banking Group becomes aparty to the contractual provisions of the financial asset or liability.
The Banking Group derecognises a financial asset from its balance
sheet when, and only when, (i) the contractual rights to the cash
flows from the financial asset expire, or (ii) the Banking Group
has transferred all or substantially all of the risks and rewards ofownership of the financial asset and no longer controls the financial
asset. The Banking Group derecognises a financial liability fromits balance sheet, when and only when, it is extinguished.

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES	10NOTES TO THE FINANCIAL STATEMENTS (continued)
1. ACCOUNTING POLICIES (continued)(xiii) Trading securities
Trading securities are those financial assets classified as held
for trading and comprise debt and equity securities and treasury
notes purchased with the intent of being actively traded. Trading
securities are initially recognised at fair value on trade date withtransaction costs taken to the income statement. Changes in thefair value (gains or losses) of these securities are recognisedin the income statement in the period in which they occur. The
assets are derecognised when the rights to receive cash flows
have expired, or the Banking Group has transferred substantiallyall of the risks and rewards of ownership. Fair value for listed
and unlisted securities is determined by the price displayed by awilling buyer in a liquid market at the reporting date. Where amarket price in a liquid market is not readily available, the fairvalue is determined by reference to the market price available fora security with similar credit, maturity and yield characteristics orby using industry standard pricing models.
(xiv) Derivative financial instruments
Derivative financial instruments are contracts whose value is derived
from changes in one or more underlying financial instruments orindices. They include swaps, forward rate agreements, futures,
options and combinations of these instruments.
Derivative financial instruments are entered into for trading
purposes (including customer-related reasons) or for hedging
purposes (where the derivative instruments are used to hedge the
Banking Group’s exposures to interest rate risk, currency risk,
price risk, credit risk and other exposures relating to non-trading
positions).
Derivative financial instruments are recognised initially at fairvalue and subsequently remeasured at fair value. Fair values are
obtained from quoted prices in active markets (including recent
transactions) and valuation techniques including discounted cash
flow models and option pricing models, as appropriate. Movementsin the fair value of derivative financial instruments are recognisedin the income statement, unless the derivative financial instrument
meets the requirement for hedge accounting.
Where the derivative financial instrument is designated as, andeffective as, a hedging instrument the timing of the recognitionof any resultant gain or loss in the income statement is dependent
on the hedging designation. These hedging designations andassociated accounting are as follows:(a) Fair value hedge
Where the Banking Group hedges the change in fair value of arecognised asset or liability or firm commitment, any change inthe fair value of derivatives designated as fair value hedges arerecognised in the income statement. Changes in the fair value ofthe hedged item attributable to the hedged risk are reflected inadjustments to the carrying value of the hedged item, which arealso recognised in the income statement.
Hedge accounting is discontinued when the hedge instrument
expires or is sold, terminated, exercised or no longer qualifies forhedge accounting. The resulting adjustment to the carrying amountof the hedged item arising from the hedged risk is amortised to theincome statement over a period to maturity. If the hedged item issold or repaid, the balance of the adjustment to the carrying valueof the hedged item is recognised in the income statement.

(b) Cash flow hedge
The Banking Group designates derivatives as cash flow hedges
where the instrument hedges the variability in cash flows ofa recognised asset or liability, or a highly probable forecast
transaction. The effective portion of changes in the fair value ofderivatives qualifying and designated as cash flow hedges aredeferred to the cash flow hedging reserve, which forms part ofshareholders’ equity. Any ineffective portion is immediately
recognised in the income statement. Amounts deferred in equity
are recognised in the income statement in the period during which
the hedged forecast transactions take place. Where the forecast
transaction that is hedged results in the recognition of a nonfinancial asset or non-financial liability, the gain or loss previously
deferred in equity is transferred from equity and included in theinitial measurement of the cost of the asset or liability.
When the hedge expires, is sold, terminated, exercised, or nolonger qualifies for hedge accounting, the cumulative amountdeferred in equity remains in the cash flow hedging reserve, and is
subsequently transferred to the income statement when the hedged
item is recognised in the income statement.
When a forecast transaction is no longer expected to occur, theamount deferred in equity is immediately recognised in the income
statement.
Derivatives that do not qualify for hedge accounting
Changes in the fair value of derivative instruments that do not
qualify for hedge accounting are recognised in the income
statement.
Embedded derivatives
Derivatives embedded in financial instruments or other hostcontracts are treated as separate derivatives when their economic
characteristics and risks are not closely related to those of the hostcontracts, and the host contracts are not measured at fair value.
The embedded derivative is reported at fair value with changes infair value immediately recognised in the income statement.
(xv) Available-for-sale assets
Available-for-sale assets comprise those non-derivative financial
assets which the Banking Group designates as available-for-sale but
which are not deemed to be held principally for trading purposes,
and include equity investments and fixed term securities. They are
initially recorded at fair value plus transaction costs. Subsequent
gains or losses arising from changes in fair value are included
as a separate component of equity called the ‘available-for-salerevaluation reserve’. When the asset is sold the cumulative gain orloss related to the asset is transferred to the income statement.
Where there is objective evidence of impairment, the cumulativeloss related to that asset is removed from equity and recognised in
the income statement. If, in a subsequent period, the amount of an
impairment loss relating to an available-for-sale asset decreases
and the decrease can be linked objectively to an event occurring
after the impairment event, the loss previously recognised in theincome statement is reversed through the income statement.
Premiums and discounts are included within the calculation of
the fair value of the security. Interest is accrued and recognised inaccordance with the effective yield basis.

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES	11
NOTES TO THE FINANCIAL STATEMENTS (continued)
1. ACCOUNTING POLICIES (continued)(xvi) Net loans and advances
Net loans and advances are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active
market. They arise when the Banking Group has no intention of
trading on the loans and advances. The loans and advances are
initially recognised at fair value plus transaction costs that are
directly attributable to the issue of the loan or advance. They
are subsequently measured at amortised cost using the effective
interest method, less any impairment loss. They are derecognised
when the rights to receive cash flows have expired or the Banking
Group has transferred substantially all the risks and rewards ofownership.
Net loans and advances include direct finance provided tocustomers such as bank overdrafts, credit cards, term loans, financelease receivables and commercial bills. Overdrafts, credit cards
and term loans are carried at amortised cost. Customer financing
through redeemable preference shares is included within net loans
and advances. Dividends received on redeemable preference sharesare taken to the income statement as part of interest income.
Finance lease receivables
Finance lease receivables include amounts due from lessees inrelation to finance leases and hire purchase contracts.
The gross amount of contractual payments regarding lease financeto business customers that have a fixed rate and a fixed term arerecorded as gross lease receivables and the unearned interest
component is recognised as income yet to mature.
The finance lease receivables are initially recognised at amounts
equal to the present value of the minimum lease payments, plus
the present value of any unguaranteed residual value expected to
accrue at the end of the lease term. Finance lease payments areallocated between interest revenue and reduction in the leasereceivable over the term of the finance lease, reflecting a constantperiodic rate of return on the net investment outstanding in respectof the lease.
Credit assessment
All loans are subject to regular scrutiny and graded according to
the level of credit risk. Loans are classified as either productive or
impaired.
Impaired assets include other impaired assets, restructured loans
and assets acquired through the enforcement of security.
Other impaired assets include loans where there is doubt as to fullrecovery, and loans that have been restructured. An individual
provision is raised to cover the expected loss, where full recovery
of principal is doubtful.
Restructured loans are those loans where the counterparty had
difficulty complying with the original terms of the contract andthe original terms have been modified to grant the counterparty
concessional terms where the yield of the loan is equal to or
greater than the Banking Group’s average cost of funds and below
the yield applicable to a customer of equal credit standing.
Assets acquired through enforcement of security are those assets
which are legally owned by the Banking Group as a result of
enforcing security, other than any buildings occupied by the
Banking Group.
Cash receipts on other impaired assets are initially applied as a
reduction in principal.

Past due assets are any loans that have not been operated by thecounterparty within its key terms for at least 90 days.
Other assets under administration are any loans, not being impairedor past due, where the customer is in any form of voluntary or
involuntary administration.
Impairment of loans and advances
Loans and advances are regularly reviewed for impairment
loss. Credit impairment provisions are raised for exposures thatare known to be impaired. Loans are impaired and impairment
losses incurred if there is objective evidence of impairment asa result of one or more loss events that occurred after the initialrecognition of the loan and that loss event (or events) has had areliably measurable impact on the estimated future cash flows of
the individual loan or the collective portfolio of loans.
Impairment is assessed initially for assets that are individuallysignificant (or on a portfolio basis for small value loans), and thenon a collective basis for those exposures not individually known
to be impaired.
For those exposures that are assessed collectively, these areplaced in pools of similar assets with similar risk characteristics.
The required provision is estimated on the basis of historicalloss experience for assets with credit risk characteristics similar
to those in the collective pool. The historical loss experience isadjusted based on current observable data.
The estimated individual impairment loss is measured as thedifference between the asset’s carrying amount and the estimatedfuture cash flows discounted to their present value at the original
effective interest rate. As this discount unwinds during theperiod between recognition of impairment and recovery of thewritten down amount, it is recognised in the income statement.
The process of estimating the amount and timing of cash flows
involves considerable management judgement. These judgements
are reviewed regularly to reduce any differences between loss
estimates and actual loss experience.
The provision for credit impairment (individual and collective) is
deducted from loans and advances in the balance sheet and the
movement in the provision for the reporting period is reflected in
the income statement as a provision for credit impairment.
When a loan is uncollectible, it is written off against the related
provision for loan impairment. Subsequent recoveries of amounts
previously written off are taken to the income statement.
Where impairment losses recognised in previous periods aresubsequently decreased or no longer exist, such impairments arereversed in the income statement.
A provision is raised for off balance sheet items such ascommitments and guarantees that are considered to be onerous.
(xvii) Operating leases
Leases as lessee
Operating lease payments are recognised as an expense on astraight-line basis over the lease term.
Leases as lessor
Operating lease rentals are included in the income statement on asystematic basis over the lease term. Gross operating lease income
comprises amounts received under the lease contracts.

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES	12NOTES TO THE FINANCIAL STATEMENTS (continued)
1. ACCOUNTING POLICIES (continued)
Operating lease assets are stated at cost less accumulated
depreciation and are included as part of premises and equipment.
Depreciation is calculated using a straight-line basis over theestimated useful lives of those assets or remaining terms of the lease
after deducting any residual values. Residual values are reviewed
at each reporting date to ensure they represent the amounts thatthe Banking Group would currently obtain from disposing of theasset, after deducting the estimated costs of disposal, if the asset
were already of the age and in the condition expected at the end of
the lease expiry. The estimated lives of lease assets vary up to 10
years.
(xviii) Repurchase agreements
Securities sold under repurchase agreements are retained in thefinancial statements where substantially all the risks and rewardsof ownership remain with the Banking Group, and a counterparty
liability is disclosed under the classifications of due to otherfinancial institutions or payables and other liabilities, dependingon the term of the agreement and the counterparty.
The difference between the sale price and the repurchase price isamortised over the life of the repurchase agreement and charged
to interest expense in the income statement.
Securities purchased under agreements to resell, where the
Banking Group does not acquire the risks and rewards ofownership, are recorded as liquid assets, net loans and advances,or due from other financial institutions, depending on the term of
the agreement and the counterparty. The security is not included in
the balance sheet.
(xix) Goodwill and other intangible assets
Goodwill
Goodwill, representing the excess of the purchase consideration
over the fair value of the identifiable net assets of a controlled entity
at the date of gaining control, is recognised as an asset. Goodwill
has an indefinite life. The carrying value of goodwill is reviewed
for impairment at each reporting period and tested for impairment
annually, or more frequently if there is an indication that the
goodwill may be impaired. This involves, where required, using
discounted cash flow or capitalisation of earnings methodology
to determine the expected future benefits of the cash generating
unit to which goodwill has been allocated. Where the assessment
results in the current carrying value of goodwill exceeding thevalue of expected future benefits, the difference is charged to theincome statement. Any impairment writedown of goodwill is notreversed in subsequent periods.
Gains and losses on the disposal of an entity include the carrying
amount of goodwill relating to the entity sold.
Other intangible assets
Other intangible assets include costs incurred in acquiring andbuilding software and computer systems (referred to as software)and an intangible asset relating to the ING New Zealand Joint
Venture acquisition.
Software is amortised using the straight-line method overits expected useful life to the Banking Group. The period ofamortisation is between 3 and 5 years except for the branch frontend applications where 7 years is used.
At each reporting date, the software assets and other intangible
assets are reviewed for impairment against impairment indicators.
If any indication of impairment exists, the recoverable amount of
the assets are estimated and compared against the existing carrying
value. Where the existing carrying value exceeds the recoverable
amount, the difference is charged to the income statement.

Costs incurred in planning or evaluating software proposals, or inmaintaining systems after implementation, are not capitalised.
(xx) Premises and equipment
Premises and equipment are carried at cost less accumulated
depreciation and impairment.
The gain or loss on the disposal of premises and equipment isdetermined as the difference between the carrying amount of theassets at the time of disposal and the proceeds of disposal, and isincluded in the income statement in the period of disposal.
Assets other than freehold land are depreciated at rates based
upon their expected useful lives to the Banking Group, using thestraight-line method. The depreciation rates used for each class ofasset are:
		
		
		
		
		

Buildings
Building integrals
Furniture & equipment
Computer & office equipment
Motor vehicles

1%
10%
10%
12.5%–33%
20%

Leasehold improvements are amortised on a straight-line basis
over the shorter of their useful lives or remaining terms of thelease.
At each reporting date, the carrying amounts of premises andequipment are reviewed for indications of impairment. If any
such indication exists, the recoverable amount of the assets are
estimated and compared against the existing carrying value.
Where the asset’s existing carrying value exceeds its recoverable
amount the difference is charged to the income statement. If it is
not possible to estimate the recoverable amount of an individual
asset, the Banking Group estimates the recoverable amount of
the cash generating unit to which the asset belongs. A previously
recognised impairment loss recognised is reversed if there has beena change in the estimates used to determine the asset’s recoverable
amount.
(xxi) Deposits and other borrowings
Deposits and other borrowings include certificates of deposit,
interest bearing deposits, debentures, commercial paper and otherrelated interest bearing financial instruments. Deposits and otherborrowings, excluding commercial paper, are initially recognised
at fair value plus transaction costs and subsequently measured
at amortised cost. The interest expense is recognised using theeffective interest method as explained in Accounting Policy (ix).
Commercial paper is designated at fair value through profit orloss, with fair value movements recorded directly in the income
statement.
(xxii) Bonds, notes and loan capital
Bonds, notes and loan capital are initially recognised at fair value
plus transaction costs and subsequently stated at amortised cost.
Interest expense is recognised in the income statement using theeffective interest method.
(xxiii) Income tax
Income tax expense
Income tax on profits for the period comprises current and deferredtax. It is recognised in the income statement as tax expense, except
when it relates to items credited directly to equity, in which case itis recorded in equity, or where it arises from the initial accounting
for a business combination, in which case it is included in thedetermination of goodwill.

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES	13
NOTES TO THE FINANCIAL STATEMENTS (continued)
1. ACCOUNTING POLICIES (continued)
Current tax
Current tax is the expected tax payable on taxable income forthe period, based on tax rates (and tax laws) which are enacted
or substantively enacted by the reporting date and including any
adjustment for tax payable in previous periods. Current tax for
current and prior periods is recognised as a liability (or asset) tothe extent that it is unpaid (or refundable).
Deferred tax
Deferred tax is accounted for using the comprehensive tax basebalance sheet liability method. Deferred tax arises by providing
for temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts
used for tax purposes.
Deferred tax assets and liabilities are measured at the tax rates thatare expected to apply to the period(s) when the asset and liability
giving rise to them are realised or settled, based on tax rates (andtax laws) that have been enacted or substantively enacted by thereporting date. The measurement reflects the tax consequencesthat would follow from the manner in which the Banking Group,at the reporting date, recovers or settles the carrying amount of its
assets and liabilities.
Deferred tax liabilities are recognised for all taxable temporary
differences, other than those in relation to taxable temporary
differences arising from goodwill. In addition deferred tax
liabilities are recognised for taxable temporary differences arisingon investments in controlled entities, branches, associates andjoint ventures, except where the Banking Group is able to control
the reversal of the temporary differences and it is probable that thetemporary differences will not reverse in the foreseeable future.
Deferred tax assets associated with these interests are recognised
only to the extent that it is probable that the temporary difference
will reverse in the foreseeable future and there will be sufficienttaxable profits against which to utilise the benefits of the temporary
difference.
Deferred tax assets, including those related to the tax effects ofincome tax losses and credits available to be carried forward, arerecognised only to the extent that it is probable that future taxable
profits will be available against which the deductible temporary
differences or unused tax losses and credits can be utilised.
Deferred tax related to fair value re-measurement of availablefor-sale financial assets and cash flow hedges, which are charged
or credited directly to equity, is also charged or credited directly
to equity and subsequently recognised in the income statement
together with the deferred gain or loss on the related asset or
liability.
Offsetting
Current and deferred tax assets and liabilities are offset only tothe extent that they relate to income taxes imposed by the same
taxation authority and there is a legal right and intention to settle
on a net basis and it is allowed under the tax law.
(xxiv) Employee benefits
Leave benefits
The amounts expected to be paid in respect of employees’
entitlements to annual leave are accrued at expected salary rates
including on-costs. Liability for long service leave is calculated
and accrued for in respect of all applicable employees (including
on-costs) using an actuarial valuation.

Superannuation schemes
The Banking Group’s contributions to its defined contribution
cash accumulation scheme are recognised as an expense in theincome statement when incurred.
The Banking Group operates two defined benefit superannuation
schemes. The liability and expense related to providing benefits
to employees under each of the defined benefit schemes arecalculated by independent actuaries. A defined benefit liability
is recognised to the extent that the present value of the defined
benefit obligation of each scheme, calculated using the Projected
Unit Credit Method, is greater than the fair value of each scheme’s
assets. Where this calculation results in a benefit to the Banking
Group, a defined benefit asset is recognised. The present value ofthe defined benefit obligation is determined by discounting theestimated future outflows by reference to New Zealand 10-year
government bond rates.
In each subsequent reporting period, ongoing movements in the
carrying value of the defined benefit liability or asset are treated asfollows:•••

the net movement relating to the current period’s service cost,interest cost, expected return on scheme assets, past service
costs and other costs (such as the effects of any curtailments
and settlements), is recognised as an employee expense in theincome statement;
movements relating to actuarial gains and losses are recognised
directly in retained profits; andcontributions incurred are recognised directly against the net
defined benefit position.

The assets of the defined benefit and cash accumulation
superannuation schemes are held in trust and are not included inthese financial statements as the Banking Group does not havedirect or indirect control of these schemes. The benefits under theschemes are provided from contributions by employee members
and by the Banking Group, and from income earned by theassets of the schemes. Members’ contributions are at varying
rates. Actuarial valuations are carried out at minimum of every
three years in accordance with the schemes’ Trust Deed andsuperannuation legislation.
Share-based compensation
The Banking Group’s employees participate in various equitysettled share-based compensation plans operated by the ANZ
and largely comprise the Employee Share Acquisition Plan and
the ANZ Share Option Plan. The Banking Group purchases ANZ
shares and share options for the benefit of its employees from the
ANZ, and as such accounts for share-based compensation plans as
cash-settled.
ANZ ordinary shares
The fair value of ANZ ordinary shares granted under the Employee
Share Acquisition Plan is measured at grant date, using the oneday volume weighted average market price of ANZ shares. The
fair value is expensed immediately when shares vest immediately.
Where shares are subject to a vesting period, the Banking Groupinitially recognises a net share compensation asset reflecting thefair value of unvested shares issued to employees of the Banking
Group. The fair value of unvested shares is amortised to profit andloss on a straight-line basis over the vesting period (normally three
years) as employee services are received.

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES	14
NOTES TO THE FINANCIAL STATEMENTS (continued)
1. ACCOUNTING POLICIES (continued)
Share Options
The fair value of ANZ share options is measured at grant date, using
an option pricing model. The fair value is expensed on a straightline basis over the relevant vesting period. This is recognised as an
employee compensation expense with a corresponding increase in
the share options liability account.

(xxviii) Offsetting of assets and liabilities
Assets and liabilities are offset and the net amount reported in thebalance sheet only where:••

The option pricing model takes into account the exercise priceof the option, the risk free interest rate, the expected volatility of
the ANZ ordinary share price and other factors. Market vesting
conditions are taken into account in estimating the fair value.
Other adjustments
The amount of expense recognised during the vesting period isadjusted for the number of shares or options expected to vest.
Non-market vesting conditions (e.g. service conditions) are taken
into account, so that ultimately the expense recognised in theincome statement reflects the number of shares or share options
that actually vest.
(xxv) Capitalised expenses
Direct external expenses, comprising direct and incremental costs
related to the acquisition of interest earning assets, including
structured institutional lending, mortgages and finance leases, areinitially recognised as part of the cost of acquiring the asset andwritten off as an adjustment to its expected yield over its expected
life using the effective interest method. The write-off is to interest
income as part of the effective interest rate.
For assets subject to prepayment, expected life is determined on
the basis of the historical behaviour of the particular asset portfolio,
taking into account contractual obligations and prepayment
experience assessed on a regular basis. Impairment is assessed
through comparing the actual behaviour of the portfolio against
initial expected life assumptions.
(xxvi) Provisions
The Banking Group recognises provisions when there is a present
obligation, the future sacrifice of economic benefits is probable,
and the amount of the provision can be measured reliably. The
amount recognised is the best estimate of the consideration
required to settle the present obligation, taking into account therisks and uncertainties surrounding the obligation. Where aprovision is measured using the cash flows estimated to settle thepresent obligation, its carrying amount is the present value of thosecash flows. Any expected third party recoveries are recognised as
an asset if it is virtually certain that recovery will be received andthe amount of the receivable can be measured reliably.
(xxvii) Goods and services tax
Revenues, expenses and assets are recognised net of the amount ofgoods and services tax (‘GST’) except where the amount of GST
incurred is not recoverable from the Inland Revenue Department(‘IRD’). In these circumstances, the GST is recognised as part ofthe cost of acquisition of the asset or as part of the expense.
Receivables and payables are stated with the amount of GST
included. The net amount of GST recoverable from, or payable
to, the IRD is included as ‘other assets’ or ‘other liabilities’ in thebalance sheet.
Cash flows are included in the cash flow statement on a net basis.
The GST components of cash flows arising from investing andfinancing activities, which are recoverable from, or payable to, theIRD are classified as operating cash flows.

There is a current enforceable legal right to offset the asset
and liability; andThere is an intention to settle on a net basis, or to realise theasset and settle the liability simultaneously.

(xxix) Contingent liabilities
Liabilities are no longer contingent, and are recognised on thebalance sheet, when the following requirements are met:••

the transaction is probable in that the contingency is likely tooccur; andthe contingency can be reasonably estimated.

Further disclosure is made within Note 41 Contingent Liabilities
and Credit Related Commitments, where the above requirements
are not met, but there is a possible obligation that is higher thanremote. Specific details are provided together with an estimate of
the range or a statement that such an estimate is not possible.
(xxx) Segment reporting
Business segments are distinguished components of the Banking
Group that provide products or services that are subject to risks
and rewards that are different to those of other business segments.
Geographical segments provide products or services within aparticular economic environment that is subject to risks andrewards that are different to those components operating in othereconomic environments.
Business segments are the Banking Group’s primary reporting
segments. For reporting purposes the four major business segments
are Retail Banking, Relationship Banking, Institutional and UDC.
The Banking Group operates primarily in one geographic segment,
New Zealand.
(xxxi) Statement of cash flows
Basis of preparation
The statement of cash flows has been prepared using the direct
approach modified by the netting of the certain items as disclosed
below.
Cash and cash equivalents
Cash and cash equivalents include liquid assets and amounts
due from/(to) other financial institutions with an original term tomaturity of less than three months.
Netting of cash flows
Certain cash flows have been netted in order to provide moremeaningful disclosure, as many of the cash flows are received anddisbursed on behalf of customers and reflect the activities of thecustomers rather than those of the Banking Group. These include
customer loans and advances, customer deposits, certificates ofdeposit, related party balances and trading securities.
(xxxii) Securitisation, funds under management, and other fiduciary
activities
Certain subsidiaries of the Bank act as trustees and/or managers
for a number of unit trusts and superannuation investment
funds. The Bank provides private banking services to customers
including portfolio management. The assets of the managed funds
and private banking clients are not included in these financial
statements, as direct or indirect control of the assets is not held by
the Banking Group. Commissions and fees earned in respect of
the Banking Group’s funds under management are included in net
operating income.

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES	15
NOTES TO THE FINANCIAL STATEMENTS (continued)
1. ACCOUNTING POLICIES (continued)
Financial services provided by any member of the Banking Groupto discretionary private banking activities or entities conducting
funds management, and assets purchased from discretionary
private banking activities or entities conducting funds management
are on arm’s length terms and conditions, and at fair value.
Securitised assets are derecognised when the right to receive
cashflows have expired or the Banking Group has transferred
substantially all the risks and rewards of ownership.

(xxxiii) Discontinued operations
A discontinued operation is a component of the Banking Group’sbusiness that represents a separate major line of business orgeographical area of operations that has been disposed of or isclassified as held for sale, or is a subsidiary that has been disposedof or is classified as held for sale.
When an operation is classified as a discontinued operation thecomparative income statement is restated as if the operation had
been discontinued from the start of the comparative period.
(xxxiv) Comparatives
To ensure consistency with the current year, comparative figures
have been restated where appropriate.

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES	16
NOTES TO THE FINANCIAL STATEMENTS (continued)
2. CRITICAL ESTIMATES AND JUDGEMENTS USED IN APPLYING ACCOUNTING POLICIES
These financial statements are prepared in accordance with New ZealandFinancial Reporting Standards and other authoritative accounting
pronouncements. Notwithstanding the existence of relevant accounting
standards, there are a number of critical accounting treatments which
include complex or subjective judgements and estimates that may affectthe reported amounts of assets and liabilities in the financial statements.
Estimates and judgements are continually evaluated and are based on
historical experience and other factors, including expectations of future
events that are believed to be reasonable under the circumstances.
An explanation of the judgements and estimates made by the Banking
Group in the process of applying its accounting policies, that havethe most significant effect on the amounts recognised in the financial
statements are set out below.
Critical accounting estimates and assumptions
Credit provisioning
Provisions for impairment in customer loans and advances are raised bymanagement to cover incurred losses arising from past events. Losses
for impaired loans are recognised when there is objective evidence that
impairment of a loan or portfolio of loans has occurred. Impairment
losses are calculated on individual loans and on loans assessedcollectively. Losses expected from future events, no matter how likely,
are not recognised. The amount of the impairment loss is recognised as
an expense in the income statement.
The calculation of impairment provisions includes consideration of all
expected cash flows associated with the loan. This includes any expectedcash flows from realisation of security and interest and takes into accountany costs expected to be incurred, including security realisation costs,
legal and administration costs.
Individual provisions
An individual provision is raised where there is an expectation of aloss of principal, interest and/or fees and there is objective evidence ofimpairment.
At each balance date, the Banking Group reviews individually significant
loans for evidence of impairment. All relevant information, including the
economic situation, solvency of the customer/guarantor, enforceabilityof guarantees, current security values and the time value of future cash
flows are taken into account in determining individual provisions. At
a minimum, individual provisions are reassessed on a quarterly basis,upon receipt of a significant asset realisation or when there is a change
in customer circumstances/business strategy.
Collective provisions
A collective provision is calculated for:• Loans subject to individual assessment to cover losses which havebeen incurred but not yet identified; and• For homogenous portfolios of loans that are not considered
individually significant (e.g. retail portfolios such as mortgages,
credit cards and some small business loans).
The collective provision is estimated on the basis of historical loss
experience for assets with credit risk characteristics similar to those in
the collective pool. The historical loss experience is then adjusted for the
impact of current observable data.
For individually significant loans, historical loss experience used to
calculate the collective provision is determined by taking into accounthistorical information on probability of default and loss given default
by risk grade. The collective provision on homogeneous or portfolio
managed exposures is calculated by applying an expected loss factor tothe outstanding drawn and undrawn balances in each loan portfolio. The
expected loss factor is determined from internal historical loss data.

The long-term historical loss experience is reviewed by management
and adjustments made to reflect current economic and credit conditions
as well as taking into account such factors as concentration risk in an
individual portfolio. In addition, management recognise that a certain
level of imprecision exists in any model used to generate risk gradingand provisioning levels. As such an adjustment is applied for modelrisk.
As at 30 September 2007 for the Banking Group, total provision for
credit impairment was $466 million representing 0.53% of total net
loans and advances (30/09/2006 $460 million or 0.59%). Of the total
provision for 30 September 2007, $422 million represented collective
provisions and $44 million represented individual provisions.
As at 30 September 2007 for the Bank, total provision for credit
impairment was $426 million representing 0.51% of total net loans andadvances (30/09/2006 $415 million or 0.56%). Of the total provision for
30 September 2007, $392 million represented collective provisions and$34 million represented individual provisions.
Management regularly reviews and adjusts the estimates andmethodologies as improved analysis becomes available. Changes inthese assumptions and methodologies could have a direct impact on
the level of provision and impairment charge recorded in the financial
statements.
Critical judgements in applying the Banking Group’s accounting
policies
Derivatives and hedging
The Banking Group buys and sells derivatives as part of its trading
operations and to hedge its interest rate risk, currency risk, price risk,
credit risk and other exposures relating to non-trading positions. The
derivative instruments used to hedge the Banking Group’s exposures
include:•
Swaps•
Foreign exchange contracts•
Forward rate agreements•
Futures•
Options, and•Combinations of the above instruments.
The Banking Group enters into derivatives for trading (includingtransactions entered into on behalf of customers) or for hedging
purposes.
Hedging
A hedging instrument is a designated derivative whose fair value orcash flows are expected to offset changes in the fair value or cash flows
of a designated hedged item. A hedged item is an asset, liability, firm
commitment or highly probable forecast transaction that (a) exposes the
Banking Group to the risk of changes in fair value or future cash flowsand (b) is designated as being hedged.
For a relationship to qualify for hedge accounting, the following criteria
must be met:
• Designation and Documentation: The hedging relationship must be
formally designated and documented at the inception of the hedge.
• Prospective Effectiveness: This is a forward-looking test of whether
a hedging relationship is expected to be highly effective in future
periods. The hedge must be expected to be highly effective inachieving offsetting changes in fair value or cash flows attributable
to the hedged risk, consistently with the originally documented risk
management strategy for that particular hedging relationship forhedge accounting to be achievable.

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES	17
NOTES TO THE FINANCIAL STATEMENTS (continued)
2. CRITICAL ESTIMATES AND JUDGEMENTS USED IN APPLYING ACCOUNTING POLICIES (continued)
The effectiveness of the hedge must be capable of being reliably
measured, that is, the fair value or cash flows of the hedged itemthat are attributable to the hedged risk and the fair value of thehedging instrument can be reliably measured. Prospective hedge
effectiveness testing is required at least quarterly.
•

Retrospective Effectiveness: This is a backward-looking test ofwhether a hedging relationship has actually been highly effective
throughout the reporting periods for which the hedge was designated(i.e. retrospectively). The actual results of the hedge must be withina range of 80 – 125 per cent.
Hedge accounting is only achieved where both prospective andretrospective effectiveness is achieved.

•

External Counterparty: For hedge accounting purposes, only
instruments that involve a party external to the Banking Group canbe designated as hedging instruments.

Judgement is required by management in selecting and designating
hedging relationships and assessing hedge effectiveness. NZ IAS 39
does not specify a single method for assessing hedge effectivenessprospectively or retrospectively. The Banking Group adopts the
hypothetical derivative approach to determine hedge effectiveness inline with current risk management strategies. Hedge ineffectivenesscan arise for a number of reasons, and whilst a hedge may pass theeffectiveness tests above it may not be perfectly effective, thus creating
volatility within the income statement through recognition of thisineffectiveness.
Fair value of derivatives
Derivatives which are entered into as part of the Banking Group’s
trading operations and those derivatives which are part of fair value
hedges are measured at fair value, with any changes in fair value
recognised in the income statement. Where liquid markets exist, fairvalue is based on quoted market prices. Where there is no active market
fair value is determined by the use of various valuation techniques
including discounted cash flow models and option pricing models. To
the extent possible models use only observable data, however such areas
as counterparty risk, volatilities and correlations require management tomake judgements and estimates. Changes in assumptions used in thesemodels and projections of future cash flows could affect the reported fairvalue of derivative financial instruments.
Goodwill
The carrying value of goodwill is subject to an impairment test to ensurethat the current carrying value does not exceed its recoverable value atthe balance sheet date. Any excess of carrying value over recoverable
amount is taken to the income statement as an impairment writedown.
As at 30 September 2007, the balance of goodwill recorded as an
asset on the Banking Group’s consolidated balance sheet as a result of
acquisitions was $3,265 million (30/09/2006 $3,266 million) of which$3,230 million relates to the acquisition of NBNZ Holdings Limited in
December 2003 (30/09/2006 $3,230 million).
As at 30 September 2007, the balance of goodwill recorded as an asseton the Bank’s balance sheet as a result of acquisitions was $3,217
million, which relates to the amalgamation of The National Bank of
New Zealand Limited in June 2004 (30/09/2006 $3,217 million).

Goodwill is allocated to cash-generating units for the purpose of
impairment testing, which is undertaken at the lowest level at which
goodwill is monitored for internal management reporting purposes.
The cash-generating unit to which goodwill related to the National
Bank Group is the NZ Geographic segment being ANZ National Bank
Limited Group.
Impairment testing of purchased goodwill is performed annually, or
more frequently where there is an indication that the goodwill may be
impaired, by comparing the recoverable value of the Banking Group,
being the smallest cash-generating unit to which the goodwill isallocated, with the current carrying amount of its net assets, including
goodwill. The recoverable amount is based on fair value less costs tosell. Where the current carrying value is greater than the recoverable
amount a charge for impairment of goodwill will be recorded in theincome statement.
In determining the fair value of the Banking Group, an independentvaluation is obtained based on a capitalisation of earnings approach.
Under this methodology valuation multiples (such as the price toearnings (PE) ratio) observed from previous transactions in the banking
sector and current price/cash earnings multiples from similar businesses
are used to determine an appropriate price/earnings multiple for the
Banking Group. This multiple is then applied to the Banking Group’s
adjusted cash earnings to determine a fair value for the Banking Group.
In determining an appropriate price multiple for the Banking Group
from that of similar companies or transactions, judgement is applied inassessing comparability, particularly with respect to the mix of business,
geographic location, growth prospects, riskiness of future earnings andsize of the overall business.
The results of the independent valuation carried out as at 31 March 2007
and used at balance date resulted in a fair value in excess of the current
carrying value for the Banking Group and hence the current carrying
value of the Banking Group goodwill is not considered impaired.
Valuation of investment in ING (NZ) Holdings Ltd (ING NZ)
The Banking Group adopts the equity method of accounting for its 49%
interest in its jointly controlled entity, ING NZ. As at 30 September
2007, the carrying value of the Banking Group’s investment in ING
NZ was $189 million (30/09/2006 $167 million). The carrying value ofthe Bank’s investment in ING NZ was $208 million (30/09/2006 $186
million).
The carrying value of this investment is subject to an impairment test
to ensure that the current carrying value does not exceed its recoverable
value at the balance sheet date. Any excess of carrying value overrecoverable amount is taken to the income statement as an impairment
writedown.
The Banking Group obtained an independent valuation of ING NZ as at
31 March 2007. The valuation was based on a value-in-use methodology
using a discounted cash flow approach. The results of the independentvaluation resulted in a value-in-use in excess of current carrying value.
Changes in the assumptions upon which the valuation is based, together
with changes in future cash flows could materially impact the valuation
obtained. Based on this independent valuation, the current carrying valueof the Banking Group’s investment in ING NZ is considered recoverable
and no impairment writedown is required.

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES	18
NOTES TO THE FINANCIAL STATEMENTS (continued)
3. RISK MANAGEMENT POLICIESThe Banking Group recognises the importance of effective risk management to its business success. Management is committed to achieving strong
control and a distinctive risk management capability that enables the Banking Group business units to meet their performance objectives.
The Banking Group approaches risk through 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 Banking Group-wide risk management policies, procedures and systems, overseen by anindependent team of risk professionals;
The use of sophisticated risk tools, applications and processes to execute the global risk management strategy across the Banking Group;
Business Unit level accountability, as the “first line of defence”, and for the management of risks in alignment with the Banking Group’s strategy;
andIndependent oversight to ensure Business Unit level compliance with policies, regulations and laws, and to provide regular risk evaluation andreporting.

The Banking Group manages risk through an approval, delegation and limits structure. Regular reviews of the policies, systems and risk reports,
including the effectiveness of the risk management systems, discussions covering the Banking Group’s response to emerging risk issues and trends, andthat the requisite culture and practices are in place across the Banking Group, are conducted within the Banking Group and also by the Ultimate Parent
Bank. The Board has responsibility for reviewing all aspects of risk management.
The Board has ultimate responsibility for overseeing the effective deployment of risk management frameworks, policies and processes within New
Zealand. The Banking Group’s Risk Committee assists the Board in this function. The role of the Committee is to assist the Board in the effective
discharge of its responsibilities for business, market, credit, operational, compliance, liquidity and reputational risk management, and to liaise and consult
with the Ultimate Parent Bank Risk Committee to assist it to discharge its responsibilities. The Banking Group has an independent Risk Management
function, which via the Chief Risk Officer, coordinates risk management directly between Business Unit risk functions and Ultimate Parent Bank Group
Risk Management functions.
The risk management process is subject to oversight by the Risk Committee of the Ultimate Parent Bank Board. This includes the review of risk
portfolios and the establishment of prudential policies and controls. Associated with this, the Ultimate Parent Bank auditor, KPMG, and the Australian
Prudential Regulatory Authority regularly review the risk management function of the Ultimate Parent Bank Group, including the Banking Group.
The Banking Group’s risk management policies are essentially the same as the Ultimate Parent Bank, but are tailored where required to suit the local
New Zealand regulatory and business environment.
The Audit Committee, which is a sub-committee of the Board, has responsibility for reviewing all aspects of published financial statements and internaland external audit processes. The Committee has a quorum of two directors, both of whom must be non-executive directors. It meets at least four times
a year, and reports directly to the Board.
Credit Risk
The Banking Group has an overall lending objective of sound growth for appropriate returns. The credit risk management framework exists to provide
a structured and disciplined process to support this objective.
This framework is top down, being defined firstly by the Banking Group’s Vision and Values and secondly, by Credit Principles and Policies. The
effectiveness of the credit risk management framework is validated through compliance and monitoring processes. These, together with portfolio
selection, define and guide the credit process, organisation and staff.
Risk Management’s responsibilities for credit risk policy and management are executed through dedicated departments, which support the Banking
Group’s business units. All major Business Unit credit decisions require approval from both business writers and independent risk personnel.
Credit risk includes concentrations of credit risk, intra day credit risk, credit risk to bank counterparties and related party credit risk, and is the potential
loss arising from the non-performance by the counterparty to an instrument or facility. Credit risk arises when funds are extended, committed, invested
or otherwise exposed through contractual agreements, and encompasses both on and off-balance sheet instruments. Credit risk is controlled through a
combination of approvals, limits, reviews and monitoring procedures that are carried out on a regular basis, the frequency of which is dependent on thelevel of risk. Credit risk policy and management is executed through the Chief Risk Officer who has various dedicated areas within the Risk Management
division. Wholesale Risk services the Banking Group’s corporate, investment banking and rural lending activities through dedicated teams. Retail Credit
services the Banking Group’s small business and consumer customers. The Portfolio Reporting team within Risk Management provides an independent
overview of credit risk across the Bank at a portfolio level. The Banking Group allows sole discretion for transaction approvals at the Business Unit levelin both the retail and wholesale lending sectors, with larger transactions approved by Retail Risk and Wholesale Risk.
Market Risk
The Banking Group has a detailed market risk management and control framework, to support trading and non-trading activities, which incorporates an
independent risk measurement approach to quantify the magnitude of market risk within the trading and non-trading books. This approach, along withrelated analysis, identifies the range of possible outcomes that can be expected over a given period of time, and establishes the relative likelihood of thoseoutcomes.

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES	19
NOTES TO THE FINANCIAL STATEMENTS (continued)
3. RISK MANAGEMENT POLICIES (continued)
Traded market risk is the risk of loss from changes in value of financial instruments due to movements in price factors for both physical and derivative
trading positions. These risks are monitored daily against a comprehensive limit framework that includes Value at Risk (VaR), aggregate market positionand sensitivity, product and geographic thresholds. The principal risk components of this monitoring process are:•••

Currency risk is the potential loss arising from the decline in the value of a financial instrument, due to changes in foreign exchange rates or theirimplied volatilities.
Interest rate risk is the potential loss arising from the change in the value of a financial instrument, due to changes in market interest rates or theirimplied volatilities.
Credit Spread risk is the potential loss arising from a decline in value of an instrument due to a deterioration in the creditworthiness of the issuer ofthe instrument.
VaR Methodology: All the above risks are measured using a VaR methodology. The VaR methodology is a statistical estimate of the maximum
daily decrease in market value with a 97.5% confidence. Conversely there is a 2.5% probability of the decrease in market value exceeding the VaR
estimate on any given day. The Banking Group has adopted the historical simulation methodology as its standard for the calculation of VaR. Thismethodology is based on assessing the change in value of portfolios each day against historical prices.

Within overall strategies and policies, control of market risk exposures at Banking Group level is the responsibility of Market Risk, who work closelywith the Markets, and Treasury business units.
The Traded Market risk function provides specific oversight of each of the main trading areas and is responsible for the establishment of a VaR frameworkand detailed control limits. In all trading areas the Banking Group has implemented models that calculate VaR exposures, monitor risk exposures against
defined limits on a daily basis, and ‘stress test’ trading portfolios. The Banking Group has an Asset and Liability Committee (‘ALCO’), comprising
executive management to provide monthly oversight of Market Risk.
The Chief Risk Officer is responsible for daily review and oversight of Traded market risk reports. The Chief Risk Officer has the authority for instructing
the business to close exposures and withdraw limits where appropriate.
Balance Sheet Risk Management embraces the management of non-traded interest rate risk, liquidity and the risk to capital and earnings as a result of
exchange rate movements. A specialist balance sheet management unit manages these, and is overseen by Risk Management and the Banking Group
Asset and Liability Committee.
•

•

•
•

Interest rate risk management’s objective is to produce strong and stable net interest income over time. The Banking Group uses simulation models
to quantify the potential impact of interest rate changes on earnings and the market value of the balance sheet. Interest rate risk management focuseson two principal sources of risk: mismatches between the repricing dates of interest bearing assets and liabilities; and the investment of capital andother non-interest bearing liabilities in interest bearing assets. Non-traded interest rate risk is managed to both value and earnings at risk limits.
Currency risk relates to the potential loss arising from the decline in the value of foreign currency positions due to changes in foreign exchange rates.
For non-traded instruments in foreign currencies, the risk is monitored and is hedged in accordance with policy. Risk arising from individual funding
and other transactions is actively managed. The total amounts of unmatched foreign currency assets and liabilities and consequent foreign currency
exposures, arising from each class of financial asset and liability, whether recognised or unrecognised, within each currency are not material.
Liquidity risk is the risk that under certain conditions, cash outflows can exceed cash inflows in a given period. The Banking Group maintains
sufficient liquid funds to meet its commitments based on historical and forecasted cash flow requirements. Liquidity risk is measured through cash
flow modelling, with profiles produced for both normal business and short-term crisis conditions.
Equity risk is the potential loss arising from the decline in the value of equity instruments held by the Banking Group due to changes in their equity
market prices or implied volatilities.

Operational Risk
Risk Management is responsible for establishing the Banking Group’s operational risk framework and associated Banking Group-level policies. Business
Units are responsible for the identification, analysis, assessment and treatment of operational risks on a day-to-day basis.
A Risk Drivers and Controls (or “Scorecards”) Approach to operational risk measurement is used to measure the operational risk profile of individual
business units, and to allocate operational risk economic capital. This approach gives business managers a strong and clear incentive to reduce operational
risk.
Operational risk is the risk arising from day-to-day operational activities which may result in direct or indirect loss. These losses may result from failure
to comply with policies, procedures, laws and regulations, from fraud or forgery, from a breakdown in the availability or integrity of services, systems
and information, or damage to the Bank’s reputation. Examples include failure to comply with policy and legislation, human error, natural disasters, fraud
and other malicious acts. Where appropriate, risks are mitigated by insurance.
Business Units have primary responsibility for the identification and management of operational risk with executive oversight provided by the relevant
Retail and Wholesale Risk Committees. The Banking Group’s Operational Risk Executive Committee (OREC) undertakes the governance function
through the monthly monitoring of operational risk performance across the Banking Group. The Board and Risk Management conduct effective oversight
through the approval of operational risk policies and frameworks and monitoring key operational risk metrics.

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES20NOTES TO THE FINANCIAL STATEMENTS (continued)
3. RISK MANAGEMENT POLICIES (continued)
Compliance
The Banking Group conducts its business in accordance with all relevant compliance requirements in each point of representation. In order to assist
the Banking Group identify, manage, monitor and measure its compliance obligations, the Banking Group has a comprehensive regulatory complianceframework in place, which addresses both external (regulatory) and internal compliance.
Risk Management, in conjunction with Business Unit staff ensure the Banking Group operates within a compliance infrastructure and framework thatincorporates new and changing business obligations and processes.
The compliance policies and their supporting framework seeks to minimise material risks to the Banking Group’s reputation and value that could
arise from non-compliance with laws, regulations, industry codes and internal standards and policies. Business Units have primary responsibility forthe identification and management of compliance. The Banking Group’s Risk Management division provides policy and framework, measurement,
monitoring and reporting, as well as leadership in areas such as anti-money laundering procedures and matters of prudential compliance. The Banking
Group’s Operational Risk Executive Committee (OREC), the Chief Risk Officer, the Board and the Risk Committee of the Ultimate Parent Bank Board
conduct Board and Executive oversight.
Internal Audit
The Banking Group’s internal audit function, conducts independent reviews that assist the Board of Directors and management to meet their statutory
and other obligations.
Internal Audit reports directly to the Chairman of the ANZ National Audit Committee and through to the General Manager Internal Audit ANZ Group.
Under its Charter, Internal Audit conducts independent appraisals of:
•
•
•
•
•

The continued operation and effectiveness of the internal controls in place to safeguard and monitor all material risks to the Banking Group;
Compliance with Board policies and management directives;
Compliance with the requirements of supervisory regulatory authorities;
The economic and efficient management of resources; and•The effectiveness of operations undertaken by the Banking Group.

In planning the audit activities, Internal Audit adopts a risk-based approach that directs and concentrates resources to those areas of greatest significance,
strategic concern and risk to the business. This encompasses reviews of major credit, market, technology and operating risks within the wider Banking
Group. Significant findings are reported quarterly to the Audit Committee.
The Internal Audit Plan is approved by the ANZ National Audit Committee and endorsed by the ANZ Group Audit Committee.
All issues and recommendations reported to management are tracked and monitored internally to ensure completion and agreed actions are undertaken
where appropriate.
Compliance with Reserve Bank of New Zealand Outsourcing Policy
The Bank is required to comply with Condition of Registration 11 by 31 December 2007. Condition 11 embodies the Reserve Bank of New Zealand’s
Outsourcing Policy (BS 11) and relates to the Bank having the legal and practical ability to control and execute business functions to ensure theperformance of certain outcomes relating to clearing and settlement, risk position identification and monitoring, and customer access to payment
facilities.
The Bank’s Compliance Plan towards Condition 11 was approved by the Reserve Bank of New Zealand on 6 June 2007. The Bank continues to work inaccordance with the Compliance Plan towards compliance with Condition 11 by 31 December 2007.

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES21

NOTES TO THE FINANCIAL STATEMENTS (continued)
4. INCOME
		Continuing operations

Consolidated
30/09/2007 30/09/2006$m$m

Parent30/09/2007 30/09/2006$m$m

Interest income
Liquid assets
Other financial institutions
Trading securities
Available-for-sale assets
Lending on productive loans
Lending on impaired assets (Note 14)
Subsidiary companies
Related parties
Other

345
220
233
7
7,468
4
–
13
19

150
407
156
52
6,409
7
–
11
14

345
178
233
6
7,161	
4
84
13
14

150
350
156
51
6,074
7
79
11
14

Total interest income

8,309

7,206

8,038

6,892

Other operating income
Net fee income1
Dividends received
Net gain on foreign exchange trading
Net gain on trading securities
Net gain (loss) on trading derivatives
Net gain on hedges not qualifying for hedge accounting
Net ineffectiveness on qualifying hedges
Net (loss) gain on financial liabilities designated at fair value through profit or loss
Other income

594
3
128
2
74
20
(1)
(2)
19

570
1
152
13
(6)
3
1
3
43

552
1,217
126
2
74
20
(1)
(2)
7

531
153
152
13
(6)
4
1
3
34

Total other operating income

837

780

1,995

885

Net fee income comprises:
Lending and credit facility fee income
Management services fee income
Other fee income

109
46
593

92
42
586

110
27
569

94
25
562

Total fee income

748

720

706

681

Direct fee expense

154

150

154

150

Net fee income

594

570

552

531

1

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES22NOTES TO THE FINANCIAL STATEMENTS (continued)
5. EXPENSES
		Continuing operations

Consolidated
30/09/2007 30/09/2006$m$m

Parent30/09/2007 30/09/2006$m$m

Interest expense
Other financial institutions
Deposits and other borrowings
Subsidiary companies1
Bonds and notes
Related party funding
Loan capital
Other

206
4,335
–
1,076
211	
157
74

213
3,716
–
744
190
117
97

100
3,774
2,210
32
211	
157
58

119
3,221
1,824
46
190
117
72

Total interest expense

6,059

5,077

6,542

5,589

650
67

623
63

620
65

592
61

35
6
12
38
39
72
–
71	
341	

35
6
10
34
43
73
49
67
320

34
6
12
13
17
13
–
167
336

35
6
10
14
24
20
49
145
317

1,331	

1,323

1,283

1,273

Operating expenses
Personnel costs
Employee entitlements
Pension costs– Defined contribution schemes– Defined benefit schemes
Share-based payments expense
Building occupancy costs
Depreciation of premises and equipment
Leasing and rental costs
Integration costs
Related parties (Note 46)
Other costs
Total operating expenses

Related party and integration operating expenses are predominantly recharges from Australia and New Zealand Banking Group Limited (Ultimate
Parent Company) for the Banking Group.
		Consolidated
Parent30/09/2007 30/09/2006
30/09/2007 30/09/2006
$000
$000
$000
$000
Auditors’ remuneration to KPMG comprises:
Audit or review of financial statements
1,549
1,798
1,314
1,308
Other audit-related services
357
486
333
362
Total auditors’ remuneration

1,906

2,284

1,647

1,670

It is Banking Group policy that KPMG can provide assurance and other audit-related services that, while outside the scope of the statutory audit,
are consistent with the role of auditor. KPMG may not provide services that are perceived to be in conflict with the role of auditor. These include
consulting advice and subcontracting of operational activities normally undertaken by management, 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 in conflict with the role ofauditor may be provided by KPMG subject to the approval of the Ultimate Parent Bank Audit Committee.
Other audit-related services include services for the audit or review of financial information other than financial reports including prudential
supervision reviews, prospectus reviews, trust audits and other audits required for local regulatory purposes.
Included in the 30 September 2006 figure was a misposting of subsidiary company interest expense, this resulted in the Parent expense line being
overstated. This misposting was corrected in the current reporting period. This misposting was not material to the Parent and had no impact on the
consolidated result.
1

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES23

NOTES TO THE FINANCIAL STATEMENTS (continued)
6. INCOME TAX EXPENSE
		Consolidated
30/09/2007 30/09/2006$m$m

Parent30/09/2007 30/09/2006$m$m

Reconciliation of the prima facie income tax payable on profit with the income
tax expense charged in the income statement
Continuing operations
Profit before income tax

1,706

1,590

2,155

921

Prima facie income tax at 33%

563

525

711	

304

Rebateable and non-assessable dividends

(12)

(7)

(401)

(51)

Other permanent items

34

9

43

60

585

527

353

313

Tax effect of change in domestic tax rate1
Income tax under (over) provided in prior years

27
2

n/a
(4)

25
1	

n/a
(3)

Total income tax expense from continuing operations

614

523

379

310

–

3

–

–

36.0%

32.9%

17.6%

33.7%

512

426

277

213

Discontinued operation
Income tax expense from discontinued operations (Note 10)
Effective tax rate (%)
The major components of the income tax expense comprise:Amounts recognised in the income statement
Current income tax charge
Current income tax charge
Adjustments recognised in the current year in relation to
current tax of prior years
Deferred income tax
Deferred tax expense relating to the origination andreversal of temporary differences

2

(4)

1	

(3)

100

101

101	

100

Total income tax expense recognised in income statement – continuing operations

614

523

379

310

The following amounts were charged or (credited) directly to equity:
Current income tax
Actuarial gain (loss) on defined benefit schemesDeferred income tax
Net gain on revaluation of cash flow hedges

1	

(1)

1	

(1)

11	

6

11	

6

Total income tax expense recognised directly in equity

12

5

12

5

Imputation Credit AccountBalance at beginning of the year
Imputation credits attached to dividends received
Taxation paid
Imputation credits attached to dividends paid
Imputation credits transferred to Imputation Credit Group

642
14
371	
(196)
–

492
17
211
(247)
169

483
91	
217
(196)
–

286
56
135
(247)
253

Balance at end of the year

831	

642

595

483

The above amounts only include items that give rise to imputation credits that are available for use by the Banking Group and/or the Bank.
The parent is a member of an Imputation Group with other members of the Banking Group. The figures shown for the Parent above include theimputation credits available for use by the Parent held by the Imputation Group.
In May 2007, legislation was passed to reduce the New Zealand corporate tax rate from 33% to 30%, effective for the 2009 income tax year.
The tax effect shown is the impact on the value of deferred tax assets and liabilities as a result of the reduction in the corporate tax rate from 1
October 2008.
1

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES24

NOTES TO THE FINANCIAL STATEMENTS (continued)
7. LIQUID ASSETS
		

8.

9.

Consolidated
30/09/2007 30/09/2006$m$m

Parent30/09/2007 30/09/2006$m$m

Cash and balances with central banks
Securities purchased under agreement to resell
Money at callBills receivable and remittances in transit

3,010
197
1,467
133

1,046
–
1,493
159

3,010
197
1,467
133

1,046
–
1,493
159

Total liquid assets

4,807

2,698

4,807

2,698

Included within liquid assets are the following balances:
Overnight balances with central banks

2,809

806

2,809

806

Able to be withdrawn without prior notice
Securities purchased under agreement to resell
Term loans and advances

952
512
2,099

1,019
657
3,941

950
512
1,639

1,017
657
3,437

Total due from other financial institutions

3,563

5,617

3,101	

5,111

Included within due from other financial institutions is the following balance:
Assets encumbered through repurchase agreements

–

1,164

–

1,164

Included within due from other financial institutions is the following
related party balance:
Australia and New Zealand Banking Group Limited (Ultimate Parent Company)

–

51

–

51

144
866
177
558
132

198
1,112
212
9
65

144
866
177
558
132

198
1,112
212
9
65

1,877

1,596

1,877

1,596

300

198

300

198

DUE FROM OTHER FINANCIAL INSTITUTIONSTRADING SECURITIES
Government, Local Body stock and bonds
Certificates of deposit
Promissory notes
Other bank bonds
Other
Total trading securities
Included within trading securities is the following balance:
Assets encumbered through repurchase agreements

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES25

NOTES TO THE FINANCIAL STATEMENTS (continued)
10. DISCONTINUED OPERATIONS
On 1 September 2006, UDC Finance Limited (‘UDC’) agreed to sell Truck Leasing Limited (‘TLL’) to Nikko Principal Investments Australia
Limited, a private equity business of Nikko Cordial Corporation. The sale was completed on 31 October 2006 for consideration of $147 million.
As the sale agreement was signed on 1 September 2006, in accordance with accounting requirements the assets and liabilities of TLL were classified
as held for sale as at 30 September 2006 and TLL treated as a discontinued operation.
TLL’s unsecured bank borrowings with UDC were repaid on the sale date and have been excluded from TLL’s liabilities classified as held for sale.
As at 31 October 2006, this balance was $438 million (30/09/2006 $423 million).
The income statements have been restated to show the discontinued operation separately from continuing operations.
The profit from discontinued operations shown in the income statement comprised:

Result of discontinued operations

Truck Leasing Limited
Unaudited
Audited
1 month toYear to31/10/2006
30/09/2006$m$m

Interest income
Interest expense

–
2

1
28

Net interest expense

(2)

(27)

Other operating income1

3

45

Net operating income
Operating expenses

1	
1	

18
9

Operating profit before provision for credit impairment and income tax
Provision for credit impairment

–
–

9
1

Operating profit before income tax
Income tax expense

–
–

8
3

Operating profit after income tax – discontinued operations–

5

Gain on sale of discontinued operations

76–

Net profit from discontinued operations

76

5

Net cash flows provided by operating activities
Net cash flows used in investing activities

15
(3)

114
(116)

Net cash flows from discontinued operations

12

(2)

14

162

8
3

90
28

3

44

Cash flows from discontinued operations

Other operating income includes:
Gross operating lease income
Less direct income related expenses– Operating lease depreciation– Other direct income related expenses
1

Net operating lease income

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES26

NOTES TO THE FINANCIAL STATEMENTS (continued)
10. DISCONTINUED OPERATIONS (continued)
The assets and liabilities classified as held for sale as at 30 September 2006 comprised:
Consolidated
Audited30/09/2006$m
Assets classified as held for sale
Net loans and advances
Current tax assets
Other assets
Deferred tax assets
Premises and equipment (including operating lease assets)
Goodwill		

3
2
40
6
486
1

Total held for sale assets		

538

Liabilities classified as held for sale
Payables and other liabilities
Provisions
Deferred tax liabilities		

23
1
29

Total held for sale liabilities		

53

The sale resulted in the following impact on the consolidated financial statements:
Consolidated
Unaudited
31/10/2006$m
Cash proceeds from sale147

Impact on net assets
Cash and cash equivalents
Assets classified as held for sale
Liabilities classified as held for sale

438
(543)
34

Impact on net assets(71)

Gain on sale76

Cash flow statement
Cash proceeds from sale
Repayment of related party loans and advances

147
438

Proceeds related to sale of controlled entities

585

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES27

NOTES TO THE FINANCIAL STATEMENTS (continued)
11. DERIVATIVE FINANCIAL INSTRUMENTS
Derivative instruments are contracts whose value is derived from changes in one or more underlying financial instruments or indices. They include
swaps, forward rate agreements, futures, options and combinations of these instruments.
The use of derivatives and their sale to customers as risk management products is an integral part of the Banking Group’s trading activities. Derivatives
are also used to manage the Banking Group’s own exposure to fluctuations in exchange and interest rates as part of its asset and liability management
activities and are classified predominantly as hedging activities. Derivatives, except for those that are specifically designated as effective hedging
instruments, are classified as held for trading. The held for trading classification includes two categories of derivative instrument, those used in sales andmarket making activities (trading positions) and those used for the Bank’s own risk management purposes that do not meet specific qualifying criteria
for hedge accounting and therefore must be classified as trading. Derivatives are subject to the same types of credit and market risk as other financial
instruments, and the Banking Group manages these risks in a consistent manner.
The principal exchange rate contracts used by the Banking Group are forward foreign exchange contracts, currency swaps and currency options.
Forward foreign exchange contracts are agreements to buy or sell a specified quantity of foreign currency on a specified future date at an agreed rate. A
currency swap generally involves the exchange, or notional exchange, of equivalent amounts of two currencies and a commitment to exchange interest
periodically until the principal amounts are re-exchanged on a future date. Currency options provide the buyer with the right, but not the obligation, either
to purchase or sell a fixed amount of currency at a specified rate on or before a future date. As compensation for assuming the option risk, the option
writer generally receives a premium at the start of the option period.
The principal interest rate contracts used by the Banking Group are forward rate agreements, interest rate futures, interest rate swaps and options.
Forward rate agreements are contracts for the payment of the difference between a specified interest rate and a reference rate on a notional depositat a future settlement date. There is no exchange of principal. An interest rate future is an exchange traded contract for the delivery of a standardisedamount of a fixed income security or time deposit at a future date. Interest rate swap transactions generally involve the exchange of fixed and floatinginterest payment obligations without the exchange of the underlying principal amounts. Interest rate options provide the buyer with the right but not the
obligation either to receive or pay interest at a specified rate on or before a future date. As compensation for assuming the option risk, the option writer
generally receives a premium at the start of the option period.
Credit risk of derivatives
The credit risk of derivative financial instruments arises from the potential for a counterparty to default on its contractual obligation. Credit risk arises
when market movements are such that the derivative has a positive value to the Banking Group. It is the cost of replacing the contract in the event ofcounterparty default. The Banking Group limits its credit risk within a conservative framework by dealing with creditworthy counterparties, settling
credit limits on exposures to counterparties, and obtaining collateral where appropriate.
Master netting arrangements
The Banking Group further restricts its exposure to credit losses by entering into master netting arrangements with counterparties with which it undertakes
a significant volume of transactions. Master netting arrangements do not generally result in an offset of balance sheet assets and liabilities, as transactions
are usually settled on a gross basis. However, the credit risk associated with favourable contracts is reduced by a master netting arrangement to the extent
that if an event of default occurs, all amounts with the counterparty are terminated and settled on a net basis. The Banking Group’s overall exposure
to credit risk on derivative instruments subject to master netting arrangements can change substantially within a short period, as it is affected by eachtransaction subject to the arrangement.
The following table provides an overview of the Banking Group’s exchange rate and interest rate derivatives. It includes all trading and hedging
contracts. Notional principal amounts measure the amount of the underlying financial contract and represent the volume of outstanding transactions.
They are not a measure of the risk associated with a derivative. The derivative instruments become favourable (assets) or unfavourable (liabilities) as
a result of fluctuations in market rates relative to their terms. The aggregate contractual or notional amount of derivative financial instruments on hand,the extent to which the instruments are favourable or unfavourable, and thus the aggregate fair values of derivative financial assets and liabilities, canfluctuate significantly from time to time. The fair values of the derivative instruments held and notional principal amounts are set out below.
The credit equivalent amount is calculated in accordance with the Reserve Bank of New Zealand’s capital adequacy guidelines. It combines the aggregate
gross replacement cost with an allowance for the potential increase in value over the remaining term of the transaction should market conditions
change.
The fair value of a derivative represents the aggregate net present value of the cash inflows and outflows required to extinguish the rights and obligations
arising from the derivative in an orderly market as at the reporting date. Fair value does not indicate future gains or losses, but rather the unrealised gains
and losses arising from marking to market all derivatives at a particular point in time.

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES28

NOTES TO THE FINANCIAL STATEMENTS (continued)
11. DERIVATIVE FINANCIAL INSTRUMENTS (continued)

30/09/2007
Derivatives held for trading
Foreign exchange derivatives
Spot and forward contracts
Swap agreements
Options purchased
Options soldInterest rate derivatives
Forward rate agreements
Swap agreements
Futures contracts
Options purchased
Options soldNotional
Principal
Amount$m

Notional
Principal
Amount$m

ParentCreditEquivalent
Amount$m

Fair values
Assets Liabilities$m$m

37,155	1,103
750	1,023
51,2533,450	1,601	1,360
2,890	153	113
–
2,866
–
–	108

37,155	1,103
750	1,023
51,2533,450	1,601	1,360
2,890	153	113
–
2,866
–
–	108

94,164

4,706

94,16474,574
318,899
17,761	
1,703
1,651	

4
3
4
74,5743,273
2,240
2,321	
318,965–4
34	17,761	
20	13–	1,703––	13	1,651	

4
3
4
3,278
2,241	
2,321
–
4
34
20	13
–
–
–	13

414,588

3,297

2,260

2,372

414,6543,302

2,261	

2,372

20

21	

20

–

20

21	

20

–

508,772

8,024

4,744

4,863

508,838

8,029

4,745

4,863

2

2

–

49

2

2

–

Equity derivatives
Options purchased
Total derivatives held for
trading

Consolidated
Credit			Equivalent
Fair values
AmountAssets Liabilities
$m
$m
$m

Derivatives held for hedging(a) Designated as cash flow hedges
Foreign exchange derivatives
Spot and forward contracts

49

2,464

2,491	

4,706

2,464

2,491

Interest rate derivatives
Swap agreements

12,568	150	10850	12,568	150	108

50

Total derivatives designatedas cash flow hedges

12,617	152	110

50	12,617	152	110

50

7

74

7

(b) Designated as fair value hedges
Foreign exchange derivatives
Swap agreements
74

4	1	

4	1	

Interest rate derivatives
Swap agreements

35,635529

386	119

35,735

517

379

91

Total derivatives designated asfair value hedges

35,709533

387	126

35,809

521	

380

98

Total derivatives held
for hedging

48,326685

497	176

48,426673

490	148

557,098

8,709

5,241	

5,039

557,264

8,702

5,235

5,011

Collateral received / paid

–

–

(530)

(115)

–

–

(530)

(115)

Total derivative financial
instruments

557,098

8,709

4,711	

4,924

557,264

8,702

4,705

4,896

Hedge accounting
Cash flow hedges
The Banking Group hedges the cash flows from variable rate loan assets, variable rate liabilities and short term reissuance of fixed rate customer andwholesale deposits through the use of interest rate swaps.
There were no transactions where cash flow hedge accounting ceased in the year ended 30 September 2007 as a result of highly probable cash flowsthat were no longer expected to occur (30/09/2006 no transactions).
All underlying hedged cash flows are expected to be recognised in the income statement in the period in which they occur which is anticipated totake place over the next 10 years.
Fair value hedges
The Banking Group is exposed to interest rate risk by providing fixed rate lending to customers. The Banking Group hedges this risk through the useof interest rate swaps. The designated hedging relationships result in fair value gains and losses on the fixed rate assets and interest rate swaps.
The fair value gains and losses are recorded through the income statement as incurred. The opposing fair value adjustments to the carrying balance
sheet value are amortised to the income statement as the fixed rate asset and interest rate swap near maturity.

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES29

NOTES TO THE FINANCIAL STATEMENTS (continued)
11. DERIVATIVE FINANCIAL INSTRUMENTS (continued)

30/09/2006
Derivatives held for trading
Foreign exchange derivatives
Spot and forward contracts
Swap agreements
Options purchased
Options soldNotional
Principal
Amount$m

Consolidated
Credit			Equivalent
Fair values
AmountAssetsLiabilities
$m
$m
$m

Notional
Principal
Amount$m

ParentCreditEquivalent
Amount$m

Fair values
AssetsLiabilities$m$m

26,32540,205
3,226
3,140

636
2,114
83
–

340
695
49
–

449
1,234
–
46

26,32540,205
3,226
3,140

636
2,114
83
–

340
695
49
–

449
1,234
–
46

72,896

2,833

1,084

1,729

72,896

2,833

1,084

1,729

24,080177,045
17,097
1,404
1,293

12
1,398
–
7
–

12
772
1
4
–

9
847
1
–
4

24,080177,209
17,097
1,404
1,293

12
1,398
–
7
–

12
773
1
4
–

9
847
1
–
4

220,919

1,417

789

861

221,083

1,417

790

861

30

22

20

–

30

22

20

–

293,845

4,272

1,893

2,590

294,009

4,272

1,894

2,590

Derivatives held for hedging(a) Designated as cash flow hedges
Interest rate derivatives
Swap agreements
5,199

40

20

19

5,199

40

20

19

Total derivatives designatedas cash flow hedges

5,199

40

20

19

5,199

40

20

19

(b) Designated as fair value hedges
Foreign exchange derivatives
Swap agreements
121

7

3

–

121

7

3

–

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

Equity derivatives
Options purchased
Total derivatives held for
trading

Interest rate derivatives
Swap agreements

27,412

208

104

173

26,839

207

102

168

Total derivatives designatedas fair value hedges

27,533

215

107

173

26,960

214

105

168

Total derivatives held
for hedging

32,732

255

127

192

32,159

254

125

187

326,577

4,527

2,020

2,782

326,168

4,526

2,019

2,777

–

–

–

(785)

–

–

–

(785)

326,577

4,527

2,020

1,997

326,168

4,526

2,019

1,992

Collateral paid
Total derivative financial
instruments

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES30NOTES TO THE FINANCIAL STATEMENTS (continued)
12. AVAILABLE-FOR-SALE ASSETS		Consolidated
30/09/2007 30/09/2006$m$m

Parent30/09/2007 30/09/2006$m$m

Government, Local Body stock and bonds
Floating rate notes
Other

4
43
1	

316
39
4

4
33
1	

316
29
4

Total available-for-sale assets

48

359

38

349

Included within available-for-sale assets is the following balance:
Assets used to secure deposit obligations

–

221

–

221

13. NET LOANS AND ADVANCES		Consolidated
30/09/2007 30/09/2006$m$m

Parent30/09/2007 30/09/2006$m$m

Overdrafts
Credit card outstandings
Term loans – housing
Term loans – non-housing
Finance lease receivables

2,012
1,338
49,751	
35,156
752

1,907
1,238
43,472
31,547
776

2,012
1,338
49,751	
31,703
37

1,907
1,238
43,47228,28244

Gross loans and advances
Provision for credit impairment (Note 15)
Unearned finance income
Fair value hedge adjustment
Deferred fee revenue and expenses
Capitalised brokerage/ mortgage origination fees

89,009
(466)
(290)
(442)
(53)
120

78,940
(460)
(248)
(119)
(50)
92

84,841	
(426)
–
(442)
(49)
120

74,943
(415)
–
(119)
(48)
92

Total net loans and advances

87,87878,15584,04474,453

89

58

89

62

Included within net loans and advances is the following related party balance:
ANZ Holdings (New Zealand) Limited (Parent Company)

The balance owing by the Parent Company is due within the next twelve months. Interest is received at variable bank rates.

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES31

NOTES TO THE FINANCIAL STATEMENTS (continued)
14. IMPAIRED ASSETS, PAST DUE ASSETS AND OTHER ASSETS UNDER ADMINISTRATION		
Consolidated
30/09/2007 30/09/2006$m$m

Parent30/09/2007 30/09/2006$m$m

On-balance sheet impaired assets, past due assets and other assets
under administration
Impaired assets (excluding restructured assets)
Balance at beginning of the year
Transfers from productive
Transfers to productive
Assets realised or loans repaid
Write offs

151	
169
(15)
(106)
(84)

213
190
(10)
(165)
(77)

129
138
(11)
(85)
(78)

186
150
(8)
(135)
(64)

Balance at end of the year

115

151

93

129

Past due assets (90 days past due assets)
Balance at beginning of the year
Transfers to past due assets
Transfers from past due assets

86
360
(344)

72
306
(292)

78
326
(309)

63
268
(253)

Balance at end of the year

102

86

95

78

Other assets under administration
Balance at beginning of the year
Transfers to other assets under administration
Transfers from other assets under administration

–
3
(3)

–
–
–

–
3
(3)

–
–
–

Balance at end of the year

–

–

–

–

Total on-balance sheet impaired assets,
past due assets and other assets under administration

217

237

188

207

Off-balance sheet impaired assets
Balance at beginning of the year
Transfers (from) to off-balance sheet impaired assets

8
(2)

7
1

8
(2)

7
1

Balance at end of the year

6

8

6

8

Interest foregone on impaired assets
Gross interest receivable on impaired loans
Interest recognised

12
(4)

15
(7)

11	
(4)

14
(7)

Net interest foregone on impaired loans

8

8

7

7

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES32

NOTES TO THE FINANCIAL STATEMENTS (continued)
15. PROVISION FOR CREDIT IMPAIRMENT
		Consolidated
30/09/2007 30/09/2006$m$m

Parent30/09/2007 30/09/2006$m$m

Collective provision
Balance at beginning of the year
Adjustment on adoption of NZ IAS 39 on 1 October 2005
Transfer to held for sale assets
Charge (credit) to income statement – continuing operations

402
–
–
20

568
(154)
(2)
(10)

364
–
–
28

565
(197)
–
(4)

Balance at end of the year

422

402

392

364

Individual provision (impaired assets)
Balance at beginning of the year
Adjustment on adoption of NZ IAS 39 on 1 October 2005
Transfer to held for sale assets
Transfers from subsidiary company
Charge to income statement – continuing operations
Charge to income statement – discontinuing operations
Recoveries
Bad debts written off
Discount unwind1

58
–
–
–
54
–
20
(84)
(4)

98
(6)
(1)
–
28
1
22
(77)
(7)

51	
–
–
–
47
–
18
(78)
(4)

81
(6)
–
7
20
–
20
(64)
(7)

Balance at end of the year

44

58

34

51

Total provision for credit impairment

466

460

426

415

Provision movement analysis
New and increased provisions
Provision releases

92
(18)

91
(41)

82
(17)

80
(40)

Recoveries

74
(20)

50
(22)

65
(18)

40
(20)

Individual provision charge
Collective provision charge (credit)

54
20

28
(10)

47
28

20
(4)

Provision for credit impairment – continuing operations

74

18

75

16

Provision for credit impairment – discontinued operations

–

1

–

–

Provision for credit impairment

74

19

75

16

Total provision for credit impairment has been deducted from grossloans and advances (Note 13).

The impairment loss on an impaired asset is calculated as the difference between the asset’s carrying amount and the estimated future cashflows
discounted to their present value. As this discount unwinds during the period it is recognised as interest income.
1

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES33NOTES TO THE FINANCIAL STATEMENTS (continued)
16. SHARES IN CONTROLLED ENTITIES, ASSOCIATES AND JOINTLY CONTROLLED ENTITIES		Consolidated
30/09/2007 30/09/2006$m$m

Parent30/09/2007 30/09/2006$m$m

Shares in controlled entities
Unquoted at cost

–

–

7,473

7,490

Shares in associates
Unquoted at cost plus equity accounted adjustments

10

3

2

3

Shares in jointly controlled entities
Unquoted at cost plus equity accounted adjustments

196

174

208

191

Total shares in controlled entities, associates andjointly controlled entities

206

177

7,683

7,684

Shares in associates comprise:
Balance at beginning of the year
Acquisitions
Disposals
Transfers to subsidiary company

3
8
(1)
–

13
–
(10)
–

3
–
–
(1)

3
–
–
–

Balance at end of the year

10

3

2

3

Shares in jointly controlled entities comprise:
Balance at beginning of the year
Acquisitions
Disposals
Transfers to subsidiary company
Share of profit of equity accounted jointly controlled entities

174
–
(2)
–
24

145
7
–
–
22

191	
–
–
(5)
22

164
5
–
–
22

Balance at end of the year

196

174

208

191

537
12
8
37
30
137
284

443
11
6
36
25
310
59

487
9
8
37
23
137
219

383
8
6
36
18
310
36

1,045

890

920

797

Shares in associates at 30 September 2007 includes goodwill of$2 million (30/09/2006 $nil) for the Banking Group(Parent 30/09/2007 $nil; 30/09/2006 $nil).

Shares in jointly controlled entities at 30 September 2007 includes
goodwill of $92 million (30/09/2006 $93 million) for the Banking Group(Parent 30/09/2007 $90 million; 30/09/2006 $90 million).

17. OTHER ASSETS
Accrued interest and prepaid discounts
Accrued commission
Defined benefit schemes surplus
Share-based payments asset
Prepaid expenses
Security settlements
Other assets
Total other assets

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES34

NOTES TO THE FINANCIAL STATEMENTS (continued)
18. DEFERRED TAX ASSETS		Consolidated
30/09/2007 30/09/2006$m$m

Parent30/09/2007 30/09/2006$m$m

Deferred tax assets
Balance at beginning of the year
Adjustment on adoption of NZ IAS 39 on 1 October 2005
Transfer from deferred tax liabilities
Transfer to held for sale assets
Charged to income statement – continuing operations
Set-off of deferred tax liabilities pursuant to set-off provisions1

122
–
–
–
(38)
(73)

415
(30)
(6)
(6)
(41)
(210)

105
–
–
–
(37)
(68)

395
(43)
(6)
–
(39)
(202)

Balance at end of the year

11	

122

–

105

Deferred tax assets comprise the following temporary differences:
Provision for credit impairment
Deferred fee revenue and expenses
Premises and equipment
SoftwareProvisions and accruals
Derivative financial instruments
Other

140
3
2
32
103
3
11	

152
5
4
32
99
9
31

129
3
(2)
32
95
4
9

137
5
(1)
31
95
9
31

294

332

270

307

(283)

(210)

(270)

(202)

Net deferred tax assets

11	

122

–

105

The deferred tax (charged) credited to the income statement
comprises the following temporary differences:
Provision for credit impairment
Deferred fee revenue and expenses
Premises and equipment
SoftwareProvisions and accruals
Derivative financial instruments
Other

(12)
(2)
(2)
–
4
(6)
(20)

(14)
(4)
(2)
16
6
(30)
(13)

(8)
(2)
(1)
1	
–
(5)
(22)

(9)
(3)
(6)
15
8
(30)
(14)

Total deferred tax charged to the income statement – continuing operations

(38)

(41)

(37)

(39)

Set-off of deferred tax liabilities pursuant to set-off provisions1

There was no deferred tax asset charged or credited to equity as at 30 September 2007 (30/09/2006 $nil).
There were no unrecognised deferred tax assets as at 30 September 2007 (30/09/2006 $nil).
The reduction in the corporate tax rate from 33% to 30% from the 2009 tax year has been taken into account in calculating the value of deferred tax
assets as at 30 September 2007.
Deferred tax assets and liabilities are set-off where they relate to income tax levied by the same taxation authority on either the same taxable entity
or different taxable entities within the same taxable group.
1

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES35NOTES TO THE FINANCIAL STATEMENTS (continued)
19. PREMISES AND EQUIPMENT		

Consolidated
30/09/2007 30/09/2006$m$m

Parent30/09/2007 30/09/2006$m$m

Freehold and leasehold land and buildings
At costAccumulated depreciation

69
(12)

68
(11)

–
–

–
–

Total carrying amount

57

57

–

–

Leasehold improvements
At costAccumulated depreciation

97
(73)

98
(71)

1	
–

3
(2)

Total carrying amount

24

27

1	

1

244
(166)

233
(158)

17
(10)

19
(12)

78

75

7

7

239
(189)

238
(193)

200
(161)

198
(164)

Total carrying amount

50

45

39

34

Work in progress

23

36

7

17

Total premises and equipment

232

240

54

59

Furniture and equipment
At costAccumulated depreciation
Total carrying amountComputer and office equipment
At costAccumulated depreciation

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES36NOTES TO THE FINANCIAL STATEMENTS (continued)
19. PREMISES AND EQUIPMENT (continued)
		Consolidated
30/09/2007 30/09/2006$m$m

Parent30/09/2007 30/09/2006$m$m

Reconciliation of the carrying amounts for each class of premises
and equipment are set out below:
Freehold and leasehold land and buildings
Balance at beginning of the year
Additions
Transfers to subsidiary company
Depreciation

57
1	
–
(1)

58
–
–
(1)

–
–
–
–

3
–
(3)
–

Balance at end of the year

57

57

–

–

Leasehold improvements
Balance at beginning of the year
Additions
Transfer to held for sale assets
Transfers to subsidiary company
Disposals
Depreciation

27
4
–
–
(3)
(4)

28
6
(1)
–
–
(6)

1	
–
–
–
–
–

21
–
–
(19)
–
(1)

Balance at end of the year

24

27

1	

1

Operating lease assets
Balance at beginning of the year
Additions
Transfer to held for sale assets
Disposals
Depreciation

–
–
–
–
–

484
176
(485)
(85)
(90)

–
–
–
–
–

–
–
–
–
–

Balance at end of the year

–

–

–

–

Furniture and equipment
Balance at beginning of the year
Additions
Transfers to subsidiary company
Disposals
Depreciation

75
21	
–
(4)
(14)

66
22
–
–
(13)

7
3
–
(1)
(2)

30
2
(22)
–
(3)

Balance at end of the year

78

75

7

7

Computer and office equipment
Balance at beginning of the year
Additions
Disposals
Depreciation

45
26
(1)
(20)

56
14
(2)
(23)

34
21	
(1)
(15)

45
10
(1)
(20)

Balance at end of the year

50

45

39

34

Work in progress
Balance at beginning of the year
(Transfers to asset classes) / net additions
Transfers to subsidiary company

36
(13)
–

26
10
–

17
(10)
–

15
13
(11)

Balance at end of the year

23

36

7

17

Total premises and equipment

232

240

54

59

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES37

NOTES TO THE FINANCIAL STATEMENTS (continued)
20. GOODWILL AND OTHER INTANGIBLE ASSETS		Consolidated
30/09/2007 30/09/2006$m$m

Parent30/09/2007 30/09/2006$m$m

Goodwill
Gross carrying amount
Balance at beginning of the year
Additions
Transfer to held for sale assets

3,265
–
–

3,263
3
(1)

3,217
–
–

3,217
–
–

Balance at end of the year

3,265

3,265

3,217

3,217

SoftwareGross carrying amount
Balance at beginning of the year
Additions from internal developments

51	
17

41
10

50
16

41
9

Balance at end of the year

68

51

66

50

Accumulated amortisation
Balance at beginning of the year
Amortisation expense1

(32)
(7)

(25)
(7)

(32)
(7)

(25)
(7)

Balance at end of the year

(39)

(32)

(39)

(32)

Total software

29

19

27

18

Other intangible assets

3

4

3

4

3,297

3,288

3,247

3,239

Total goodwill and other intangible assets

No impairment losses have been recognised against the gross carrying amount of goodwill, software and other intangible assets for the year ended
30 September 2007 (30/09/2006 $nil).
1

Software amortisation expense is included in other costs in the income statement.

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES38NOTES TO THE FINANCIAL STATEMENTS (continued)
21. DUE TO OTHER FINANCIAL INSTITUTIONS		Consolidated
30/09/2007 30/09/2006$m$m

Parent30/09/2007 30/09/2006$m$m

Australia and New Zealand Banking Group Limited (Ultimate Parent Company)
Securities sold under agreements to repurchase
Other financial institutions

1,140
300
1,730

1,082
1,362
1,543

–
300
1,386

–
1,362
1,466

Total due to other financial institutions

3,170

3,987

1,686

2,828

Included within due to other financial institutions is the following balance:
Balances owing to the Ultimate Parent Company by ANZ National (Int’l) Limited
guaranteed by the Bank

1,140

1,082

–

–

Amortised cost
Certificates of deposit
Term deposits
Demand deposits bearing interest
Deposits not bearing interest
Secured debenture stock
Secured deposits

4,447
28,99821,128
4,354
1,786
–

3,941
25,931
20,007
4,130
2,077
200

4,447
28,99820,715
4,354
–
–

3,941
25,931
19,592
4,130––

Total deposits and other borrowings recognised at amortised cost

60,71356,28658,51453,594

Fair value through the profit or loss
Commercial paper

9,317

6,890

–

–

Total deposits and other borrowings recognised at fair value

9,317

6,890

–

–

Total deposits and other borrowings

70,03063,17658,51453,594

Included within deposits and other borrowings is the following balance:
Commercial paper issued by ANZ National (Int’l) Limited
guaranteed by the Bank at amortised cost

9,319

6,894

–

–

2,065

2,375

–

–

Balances owing to the Ultimate Parent Company are due
within twelve months. Interest is paid at short term bank rates.

22. DEPOSITS AND OTHER BORROWINGSUDC Finance Limited secured debentures
Registered secured debenture stock is constituted and secured by trust deeds between
certain companies within the UDC Group (the “Charging Group”) and independent
trustees. The trust deeds create floating charges over all the assets, primarily loans
and advances, of those companies. As at the date of these financial statements,
UDC Finance Limited is the only member of the Charging Group.
Carrying value of total tangible assets

All changes in the fair value of commercial paper are primarily attributable to changes in the benchmark interest rates (30/09/2006 all changes).
The principal at maturity of commercial paper at fair value through the profit and loss is $9,404 million (30/09/2006 $6,995 million).

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES39NOTES TO THE FINANCIAL STATEMENTS (continued)
23. PAYABLES AND OTHER LIABILITIES		Creditors
Accrued interest and unearned discounts
Share-based payments liability
Accrued charges
Security settlements
Equitable assignment of mortgages1
Other liabilities
Total payables and other liabilities

Consolidated
30/09/2007 30/09/2006$m$m

Parent30/09/2007 30/09/2006
$m
$m

55
770
20
170
37
32
267

68
546
33
142
184
44
199

28
582
20
161	
37
32
128

45
416
33
136
184
44
133

1,351	

1,216

988

991

The ANZ FlexiMortgage Income Trust holds mortgages under an equitable assignment with the Bank. The ANZ FlexiMortgage Income Trust can at
any time require the Bank to repurchase any mortgage. The Bank may also require repurchase in certain circumstances. The mortgages are includedin these financial statements.
1

24. DEFERRED TAX LIABILITIES		Provision for deferred income tax
Balance at beginning of the year
Adjustment on adoption of NZ IAS 39 on 1 October 2005
Transfer to deferred tax assets
Transfer to held for sale liabilities
Charged to income statement – continuing operations
Charged to income statement – discontinuing operations
Charged directly to equity
Set-off of deferred tax liabilities pursuant to set-off provisions1

Consolidated
30/09/2007 30/09/2006$m$m

Parent30/09/2007 30/09/2006
$m
$m

–
–
–
–
62
–
11	
(73)

150
21
(6)
(29)
60
8
6
(210)

–
–
–
–
64
–
11	
(68)

120
21
(6)
–
61
–
6
(202)

–

–

7

–

110
–
2
171	

90
4
2
114

104
–
2
171	

82
4
2
114

283

210

277

202

(283)

(210)

(270)

(202)

Net deferred tax liabilities

–

–

7

–

The deferred tax charged (credited) to the income statement
comprises the following temporary differences:
Lease finance
Share compensation
Defined benefit schemes
Other

20
(4)
–
46

39
–
(1)
22

22
(4)
–
46

40
–
(1)
22

Total deferred tax charged to the income statement – continuing operations

62

60

64

61

The deferred tax charged to equity comprises
the following temporary differences:
Cash flow hedges

11	

6

11	

6

Total deferred tax charged directly to equity

11	

6

11	

6

Balance at end of the year
Deferred income tax liabilities comprisethe following temporary differences:
Lease finance
Share compensation
Defined benefit schemes
Other

Set-off of deferred tax liabilities pursuant to set-off provisions1

The reduction in the corporate tax rate from 33% to 30% from the 2009 tax year has been taken into account in calculating the value of deferred
tax liabilities as at 30 September 2007.
Deferred tax assets and liabilities are set-off where they relate to income tax levied by the same taxation authority on either the same taxable
entity or different taxable entities within the same taxable group.
1

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES40NOTES TO THE FINANCIAL STATEMENTS (continued)
25. PROVISIONS		

Non-lending losses, frauds and forgeries

Consolidated
30/09/2007 30/09/2006$m$m

Parent30/09/2007 30/09/2006
$m
$m

3

4

3

4

Employee entitlements (Note 1)
Balance at beginning of the year
New provisions
Provisions utilised
Transfer to held for sale liabilities

107
56
(53)
–

109
52
(53)
(1)

106
54
(52)
–

107
50
(51)
–

Balance at end of the year

110

107

108

106

Personnel restructuring costs (Note 2)
Balance at beginning of the year
New provisions
Provisions utilised
Unused amounts reversed

9
–
(7)
–

6
8
(4)
(1)

9
–
(7)
–

6
8
(4)
(1)

Balance at end of the year

2

9

2

9

Redundant assets restructuring costs (Note 2)
Balance at beginning of the year
New provisions
Provisions utilised
Unused amounts reversed

5
–
(3)
–

16
1
(4)
(8)

2
–
–
–

13
1
(3)
(9)

Balance at end of the year

2

5

2

2

Other provisions (Note 3)

48

34

36

34

Total provisions

165

159

151	

155

Note 1: Employee entitlements
The provision for employee entitlements provides mainly for the cost of employee entitlements to annual leave, long service leave and retirement
leave. The majority of employees utilise their annual leave in the year the entitlement accrues.
Note 2: Personnel restructuring costs and redundant assets restructuring costs
Restructuring cost provisions arise from exit activities relating to material changes in the scope or manner of business undertaken by the Banking
Group and includes termination benefits. Provisions are made when the Banking Group is demonstrably committed, it is probable that the costs will
be incurred, though their timing is uncertain, and the costs can be reliably estimated. The provisions recognised at 30 September 2007 are expected
to be settled over the 2008 financial year, with the exception that provisions for losses arising from rental commitments on leased premises whichhave become vacant as a result of restructuring will be settled over the remaining term of the leases.
Note 3: Other provisions
In 2007, a new provision of $15 million was raised as a result of the sale of Truck Leasing Limited.

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES41

NOTES TO THE FINANCIAL STATEMENTS (continued)
26. BONDS AND NOTES

Issued by ANZ National Bank Limited
Denomination Face value		NZD
150m
fixed rate notes
NZD
150m
fixed rate notes
1
Other bonds and notes
Issued by ANZ National (Int’l) Limited
Denomination Face value		HKD
234m
fixed rate notes
GBP
100m
floating rate notes
USD
100m
floating rate notes
EUR
25m
floating rate notes
GBP
250m
floating rate notes2
EUR
100m
floating rate notes
GBP
300m
floating rate notes
HKD
80m
fixed rate notes
NZD
150m
fixed rate notes
USD
27m
fixed rate notes3
USD
120m
floating rate notes
USD
250m
fixed rate notes
USD
750m
floating rate notes
GBP
40m
floating rate notes
JPY
9,000mfloating rate notes
USD
1,321mfloating rate notes9
EUR
750m
floating rate notes
HKD
1,000mfixed rate notes
NZD
150m
floating rate notes
HKD
300m
fixed rate notes
HKD
280m
fixed rate notes
USD
750m
floating rate notes
USD
250m
floating rate notes
USD
300m
floating rate notes
NZD
20m
floating rate notes
EUR
300m
floating rate notes
HKD
130m
floating rate notes4
HKD
150m
floating rate notes5
HKD
190m
floating rate notes6
HKD
200m
floating rate notes7
HKD
200m
floating rate notes8
USD
750m
floating rate notes
USD
179m
floating rate notes9
NZD
100m
floating rate notes
USD
75m
fixed rate notes10
USD
300m
fixed rate notes
GBP
400m
floating rate notes
HKD
200m
fixed rate notes11
HKD
200m
fixed rate notes12
GBP
450m
floating rate notes2

Consolidated
30/09/2007 30/09/2006$m$m
Maturity Interest rate %
2009
6.82%
2011
6.80%

150
150
261

150
150
175

150
150
261

150
150
175

561

475

561

475

Maturity Interest rate %
–
2006
4.95%
2007
3 month GBP LIBOR - 0.03%–
2007
3 month LIBOR - 0.10%–
2007
3 month EURIBOR - 0.08%–
2007
3 month LIBOR - 0.01%
668
2008
3 month EURIBOR + 0.02%
187
2008
3 month GBP LIBOR + 0.01%
802
2008
3.93%
14
2008
6.50%
150
2008
4.25%
36
2008
3 month LIBOR - 0.06%
158
2008
4.265%
330
2008
3 month LIBOR + 0.07%
991
2008
3 month GBP LIBOR - 0.065%
107
2008
3 month JPY LIBOR
103
2008
1 month LIBOR
1,744
2009
3 month EURIBOR + 0.12%	1,403
2009
4.40%
170
2009
3 month BKBM + 0.10%
150
2009
4.93%
51
2009
4.44%
48
2009
3 month LIBOR + 0.04%
991
330
2009
3 month Prime - 2.9125%
2009
1 month LIBOR + 0.04%
396
2009
3 month BKBM + 0.05%
20
2009
3 month EUR LIBOR + 0.15%561
2010
3 month HIBOR + 0.46%–
2010
6 month HIBOR + 0.60%
26
2010
6 month HIBOR + 0.60%
32
2010
6 month HIBOR + 0.60%
342010
3 month HIBOR + 0.405%–
2010
3 month LIBOR + 0.11%991
2010
1 month LIBOR
237
2010
3 month BKBM + 0.05%
100
2011
5.182%
–
2011
5.50%
396
2011
3 month LIBOR + 0.05%
1,069
2011
5.10%
34
2011
4.90%
34
2012
6 month GBP LIBOR + 0.08%
1,203

46
288
153
49
719
195
863
16
150
41
–
383
1,149
115
117
2,023
1,461
197
150
59
–
1,150
–
–
20
–
26
30
37
39
39
1,149
274
–
115
460
–
–
–
–

–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–

–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–

13,566

11,513

–

–

480

480

–

–

14,607

12,468

561

475

					
Issued by NBNZ Holdings Limited
Denomination Face value		
NZD
480m
floating rate notes13

Parent30/09/2007 30/09/2006$m$m

Maturity Interest rate %2008
3 month BKBM

Total bonds and notes				Included within bonds and notes is the following related party balance:
Australia and New Zealand Banking Group Limited (Ultimate Parent Company)
1,871	
719––
1
Other bonds and notes includes index linked notes, equity linked notes and other fixed rate and fixed term bonds.
2
These notes were issued to Australia and New Zealand Banking Group Limited.
3
The interest rate payable on these notes is stepped as follows: Year 1 3.00%, Year 2 3.25%, Year 3 3.50%, Year 4 4.25% and Year 5 5.00%. The issuer may
elect to redeem the notes annually from May 2004.
4
The interest rate payable on these notes is stepped as follows: Year 1 HIBOR + 0.46%, Years 2 – 5 HIBOR + 0.60%. For each 6 month period after Year 1,
there is a maximum interest rate payable, starting at 4.60% after Year 1 and stepping up 0.25% every 6 months. The issuer exercised their option to call thenote on 6 October 2006.
5
The interest rate payable on these notes is stepped as follows: Year 1 3.77%, Years 2 – 5 HIBOR + 0.60%. For each 6 month period after Year 1, there is a
maximum interest rate payable, starting at 3.75% after Year 1 and stepping up 0.25% every 6 months. The issuer has the right to redeem the notes on every
semi-annual coupon date from 28 April 2006.
6
The interest rate payable on these notes is stepped as follows: Year 1 3.77%, Years 2 – 5 HIBOR + 0.60%. For each 6 month period after Year 1, there is a
maximum interest rate payable, starting at 3.75% after Year 1 and stepping up 0.25% every 6 months. The issuer has the right to redeem the notes on every
semi-annual coupon date from 28 April 2006.
7
The interest rate payable on these notes is stepped as follows: Year 1 HIBOR + 1.26%, Years 2 – 5 HIBOR + 0.60%. For each 6 month period after Year 1,
there is a maximum interest rate payable, starting at 4.00% after Year 1 and stepping up 0.25% every 6 months. The issuer has the right to redeem the noteson every semi-annual coupon date from 26 May 2006.
8
The interest rate payable on these notes is stepped as follows: Year 1 HIBOR + 0.405%, Years 2 – 5 HIBOR + 0.60%. For each 6 month period after Year1, there is a maximum interest rate payable, starting at 4.60% after Year 1 and stepping up 0.25% every 6 months. The issuer exercised their option to callthe note on 6 October 2006.
9
The interest rate payable on these notes is stepped as follows: Year 1 1 month LIBOR - 0.02%, Year 2 1 month LIBOR, Year 3 1 month LIBOR + 0.01%,
Year 4 1 month LIBOR + 0.02% and Year 5 1 month LIBOR + 0.03%. The investor may elect to extend the maturity of the notes for a year on a monthly
basis. On 7 August 2007 and 7 September 2007 investors elected not to extend USD 89 million and USD 1,232 million of bonds which has resulted inthese bonds carrying a fixed maturity of 7 August 2008 and 5 September 2008 respectively.
10
These notes were redeemed at the option of the issuer on 1 February 2007.
11
The interest rate payable on these notes is stepped as follows: Year 1 5.10% per annum, Year 2 4.65% per annum, Years 3–5 4.40% per annum. The issuer
has the right to redeem the notes on every coupon date from 5 December 2007.
12
The interest rate payable on these notes is stepped as follows: Year 1 4.90% per annum, Year 2 4.65% per annum, Years 3–5 4.40% per annum. The issuer
has the right to redeem the notes on every coupon date from 6 December 2007.
13
These notes can be redeemed by giving not less than 30 days notice by the note holder.
Bonds and notes issued by ANZ National (Int’l) Limited are guaranteed by the Bank.

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES42NOTES TO THE FINANCIAL STATEMENTS (continued)
27. RELATED PARTY FUNDING		ANZ Holdings (New Zealand) Limited (Parent Company)

Consolidated
30/09/2007 30/09/2006
$m
$m
2,775

2,720

Parent30/09/2007 30/09/2006
$m
$m
2,775

2,720

The following amounts have been provided by the Parent Company:
Date advanced
Underlying currency
September 2003
AUD 1,000,000,000
November 2003
USD 1,100,000,000
These funds have been borrowed in New Zealand dollars on an overnight basis and are at call. Interest is payable monthly, based on New Zealandovernight deposit rates. The New Zealand dollar equivalents of the AUD and USD funds have been hedged by the Parent Company until 15
September 2008 and 15 December 2007 respectively.

28. LOAN CAPITAL		

Consolidated
30/09/2007 30/09/2006$m$m

Parent30/09/2007 30/09/2006$m$m

AUD 207,450,000 term subordinated floating rate loan
AUD 265,740,000 perpetual subordinated floating rate loan
AUD 186,100,000 term subordinated floating rate loan
AUD 43,767,507 term subordinated floating rate loan
AUD 169,520,000 term subordinated floating rate loan
NZD term subordinated fixed rate bonds

242
309
217
51	
197
1,046

238
304
213
50
–
1,000

242
309
217
51	
197
1,046

238
304
213
50
–
1,000

Total loan capital

2,062

1,805

2,062

1,805

Included within loan capital is the following related party balance:
Australia and New Zealand Banking Group Limited (Ultimate Parent Company)
1,016
805
1,016
805
AUD 207,450,000 loan
This loan was drawn down on 31 August 2004 and has an ultimate maturity date of 31 August 2014. The Bank may elect to repay the loan on 31
August each year commencing from 2009 through to 2014. All interest is payable half yearly in arrears, with interest payments due 28 February and
31 August. Interest is based on BBSW + 0.40% p.a. up until, and including, 31 August 2009 and increases to BBSW + 0.90% p.a. thereafter.
AUD 265,740,000 loan
This loan was drawn down on 27 September 1996 and has no fixed maturity. Interest is payable half yearly in arrears based on BBSW + 0.95% p.a.,with interest payments due 15 March and 15 September.
AUD 186,100,000 loan
This loan was drawn down on 19 April 2005 with an ultimate maturity date of 20 April 2015. The Bank may elect to repay the loan on 19 April eachyear commencing from 2010 through to 2015. All interest is payable half yearly in arrears, with interest payments due 19 April and 19 October.
Interest is based on BBSW + 0.32% p.a. to 19 April 2010 and increases to BBSW + 0.82% p.a. thereafter.
AUD 43,767,507 loan
This loan was drawn down on 15 September 2006 with an ultimate maturity date of 15 September 2016. The Bank may elect to repay the loan on
15 September each year commencing from 2011 through to 2016. All interest is payable half yearly in arrears, with interest payments due 15 Marchand 15 September. Interest is based on BBSW + 0.29% p.a. to 15 September 2011 and increases to BBSW + 0.79% p.a. thereafter.
AUD 169,520,000 loan
This loan was drawn down on 17 September 2007 with an ultimate maturity date of 17 September 2017. The Bank may elect to repay the loan on
17 September each year commencing from 2012 through to 2016. All interest is payable half yearly in arrears, with interest payments due 17 Marchand 17 September. Interest is based on BBSW + 0.68% p.a. to 17 September 2012 and increases to BBSW + 1.18% p.a. thereafter.
NZD term subordinated fixed rate bonds
The terms and conditions of these fixed rate and fixed term bonds are as follows:
New Zealand Exchange listed bonds
Issue dateAmount $m Coupon rate
Call date
Maturity date
15 September 2006
350
7.16%
15 September 201115 September 2016
2 March 2007
250
7.60%
2 March 2012
2 March 201723 July 2007
350
8.23%
23 July 201223 July 2017
The Bank may elect to redeem the bonds on their call date. If the bonds are not called the Bank will continue to pay interest to maturity at the five
year interest rate swap rate plus 0.75% p.a., 0.76% p.a. and 0.62% p.a. for the $350 million, $250 million and $350 million bonds, respectively.
Interest is payable half yearly in arrears based on the fixed coupon rate. On 23 July 2007, the Bank redeemed bonds with face value of $300
million and a coupon rate of 7.04% p.a.
As at 30 September 2007, these bonds carried an AA- rating by Standard & Poor’s.
These bonds are listed on the NZX. The Market Surveillance Panel of the NZX granted the Bank a waiver from the requirements of Listing Rules
10.4 and 10.5. Rule 10.4 relates to the provision of preliminary announcements of half yearly and annual results to the NZX. Rule 10.5 relates
to preparing and providing a copy of half yearly and annual reports to the NZX. The Bank has been granted a waiver from these rules on theconditions that the Bank’s quarterly General Disclosure Statement (‘GDS’) is available on the Bank’s website, at any branch and at the NZX;
that bondholders are advised by letter that copies of the GDS are available at the above locations; that all bondholders are notified on an ongoingbasis, by way of a sentence included on the notification of interest payments, that the latest GDS is available for review at the above locations;and that a copy of the GDS is sent to the NZX on an ongoing basis.
Non-listed bonds
Issue dateAmount $m Coupon rate
Call date
Maturity date
20 February 2003
100
6.46%
20 August 2008
20 August 2013
The Bank may elect to redeem this bond on its call date. If the bonds are not called the Bank will continue to pay interest to maturity at the five
year interest rate swap rate plus 0.97% p.a. Interest is payable half yearly in arrears based on the fixed coupon rate. On 16 April 2007, the Bank
redeemed bonds with face value of $125 million and a coupon rate of 7.61% p.a. On 17 September 2007, the Bank redeememed bonds with facevalue of $125 million and a coupon rate of 7.40% p.a.
As at 30 September 2007, these bonds carried an AA- rating by Standard & Poor’s.
Loan capital is subordinated in right of payment in the event of liquidation or wind up to the claims of depositors and all creditors of the Bank.

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES43NOTES TO THE FINANCIAL STATEMENTS (continued)
29. ORDINARY SHARE CAPITAL		

Ordinary shares at beginning and end of the year		Consolidated
30/09/2007
30/09/2006
Number of
Number ofIssuedIssuedSharesSharesParent30/09/2007
Number ofIssuedShares30/09/2006
Number ofIssuedShares

700,755,498

700,755,498

700,755,498

Parent30/09/2007$m

30/09/2006$m

700,755,498

Consolidated
30/09/2007
30/09/2006
$m
$m
5,943

Ordinary share capital at beginning and end of the year

5,943

5,943

5,943

The authorised share capital of the Bank comprises 700,755,498 ordinary shares.
At beginning and end of the year, 650,712 ordinary shares were uncalled (30/09/2006 650,712 shares).
Voting rights
At a meeting: on a show of hands or vote by voice every member who is present in person or by proxy or by representative shall have one vote.
On a poll: every member who is present in person or by proxy or by representative shall have one vote for every share of which such member isthe holder.

30. RESERVES AND RETAINED PROFITS		Consolidated
30/09/2007
30/09/2006$m$m

Parent30/09/2007$m

30/09/2006$m

Available-for-sale revaluation reserve
Balance at beginning of the year
Adjustment on adoption of NZ IAS 39 on 1 October 2005
Valuation (loss) gain recognised after tax
Cumulative gain transferred to the income
statement on sale of financial assets

3
–
(1)

n/a
–
3

3
–
(1)

n/a
–
3

(3)

–

(3)

–

Balance at end of the year

(1)

3

(1)

3

Cash flow hedging reserve
Balance at beginning of the year
Adjustment on adoption of NZ IAS 39 on 1 October 2005
Valuation gain recognised after tax
Transferred to income statement

52
–
48
(16)

n/a
40
20
(8)

52
–
48
(16)

n/a
40
20
(8)

Balance at end of the year

84

52

84

52

Total reserves

83

55

83

55

Retained profits
Balance at beginning of the year
Adjustment on adoption of NZ IAS 39 on 1 October 2005
Profit after income tax

2,235
–
1,168

2,003
61
1,072

651	
–
1,776

851
90
611

Total available for appropriation
Actuarial gain (loss) on defined benefit schemes after tax
Interim ordinary dividends paid

3,403
2
(728)

3,136
(1)
(900)

2,427
2
(728)

1,552
(1)
(900)

Balance at end of the year

2,677

2,235

1,701	

651

The dividend on ordinary shares was $1.04 per share (30/09/2006 $1.28 per share).

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES44NOTES TO THE FINANCIAL STATEMENTS (continued)
31. CAPITAL ADEQUACY		Consolidated
30/09/2007 30/09/2006

Registered Bank
30/09/2007 30/09/2006

Capital Adequacy Ratios
Tier 1 Capital

7.19%

7.34%

6.98%

7.09%

Total Capital

10.08%

10.14%

9.02%

8.96%

Tier 1 Capital

4.00%

4.00%

4.00%

4.00%

Total Capital

8.00%

8.00%

8.00%

8.00%

Reserve Bank of New Zealand minimum ratios:

The information contained in the table below has been derived in accordance with the Conditions of Registration imposed pursuant to section 74 (4)(b) of the Reserve Bank of New Zealand Act 1989 and the capital adequacy framework issued by the Reserve Bank of New Zealand.
For the purposes of calculating the capital adequacy ratios for the Registered Bank (“solo basis”), wholly owned and wholly funded subsidiaries of
ANZ National Bank Limited are consolidated with the Bank. In this context, wholly funded by the Bank means that there are no liabilities (including
off-balance sheet obligations) to anyone other than the Bank, the Department of Inland Revenue and trade creditors, where aggregate exposure to
trade creditors does not exceed 5% of the subsidiary’s shareholders’ equity. Wholly owned by the Bank means that all equity issued by the subsidiaryis held by the Bank.
		
Consolidated
Registered Bank
30/09/2007 30/09/2006
30/09/2007 30/09/2006
$m
$m
$m
$m
Tier 1 Capital
Ordinary share capital
Revenue and similar reserves
Current year’s profit after tax

5,943
1,592
1,168

5,943
1,218
1,072

5,943
1,280
1,195

5,943
979
1,001

Less deductions from Tier 1 Capital– Goodwill– Other intangible assets– Defined benefit schemes surplus (net of tax)
– Equity investment in ING NZ– Cash flow hedging reserve

3,265
32
5
189
84

3,266
23
n/a
167
52

3,262
30
5
189
84

3,262
22
n/a
167
52

Total Tier 1 Capital

5,128

4,725

4,848

4,420

Tier 2 Capital – Upper Level Tier 2 Capital
Perpetual subordinated debt

309

304

309

304

Tier 2 Capital – Lower Level Tier 2 Capital
Term subordinated debt

1,753

1,501

1,753

1,501

Total Tier 2 Capital

2,062

1,805

2,062

1,805

Total Tier 1 Capital Plus Tier 2 Capital

7,190

6,530

6,910

6,225

–

–

642

642

Capital

7,190

6,530

6,268

5,583

Total risk-weighted exposures
On-balance sheet exposures
Off-balance sheet exposures

66,1595,152

60,1604,223

64,372
5,117

58,137
4,185

71,311	

64,383

69,48962,322Less deductions from Total Capital– Equity investments in subsidiaries

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES45NOTES TO THE FINANCIAL STATEMENTS (continued)
31. CAPITAL ADEQUACY (continued)
Total Risk Weighted Exposures of the Banking Group as at 30 September 2007:
Principal
Amount$m

On-balance sheet exposures

Risk
Weight%Risk
Weighted$m

Cash and short term claims on Government
Long term claims on Government
Claims on banks
Claims on public sector entities
Residential mortgages
Other
Non-risk weighted assets

3,792
0
–
492	1049
5,160
20	1,032
390
20
78
49,51050
24,75540,245	100
40,245
8,198
n/a–

Total on-balance sheet exposures

107,787		

Off-balance sheet exposures

Notional
Principal
Amount$m

CreditConversion
Factor%CreditEquivalent
Amount$m

Average
Risk
Weight%Risk
Weighted$m2,461	100
2,461	
49	1,210
1,089	100	1,089
63
683
398
50	199	100	199
123
20
25
60	15

Direct credit substitutes
Commitments with certain drawdown
Transaction related contingent liabilities
Short term self liquidating trade related contingencies
Other commitments to provide financial services
which have an original maturity of one year or more
Other commitments with an original maturity less than
one year or which can be unconditionally cancelled
at any time
Market related contracts1– Foreign exchange– Interest rate
– Equity

94,287		
462,791		
20

Total off-balance sheet exposures

581,920		13,481		

166,1591,996

50998	100

998

18,755

0

–	100

–

4,712
3,976
21	

The credit equivalent amounts for market related contracts are calculated using the current exposure method.

25	1,191
21	
852
20
4
5,152

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES46

NOTES TO THE FINANCIAL STATEMENTS (continued)
31. CAPITAL ADEQUACY (continued)
Total Risk Weighted Exposures of the Banking Group as at 30 September 2006 :Principal
Amount$m

Risk
Weight%Risk
Weighted$m

Cash and short term claims on Government
Long term claims on Government
Claims on banks
Claims on public sector entities
Residential mortgages
Other
Non-risk weighted assets

2,328
824
6,481
425
43,52636,934
5,296

0
10
20
20
50
100
n/a

–
82
1,296
85
21,76336,934–

Total on-balance sheet exposures

95,814		

60,160On-balance sheet exposures

Off-balance sheet exposures

Notional
Principal
Amount$m

CreditConversion
Factor%CreditEquivalent
Amount$m

Average
Risk
Weight%Risk
Weighted
$m

2,056
1,259
376
89

100
100
50
20

2,056
1,259
188
18

46
61
100
94

946
771
188
17

2,351

50

1,175

100

1,175

17,987

Direct credit substitutes
Commitments with certain drawdown
Transaction related contingent liabilities
Short term self liquidating trade related contingencies
Other commitments to provide financial services
which have an original maturity of one year or more
Other commitments with an original maturity less than
one year or which can be unconditionally cancelled
at any time
Market related contracts1– Foreign exchange– Interest rate
– Equity

0

–

100

–

73,017		
253,530		
30		

2,840
1,665
22

26
23
20

745
377
4

Total off-balance sheet exposures

350,695		

9,223		

4,223

The credit equivalent amounts for market related contracts are calculated using the current exposure method.

1

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES47

NOTES TO THE FINANCIAL STATEMENTS (continued)
31. CAPITAL ADEQUACY (continued)
Total Risk Weighted Exposures of the Registered Bank as at 30 September 2007:
Principal
Amount$m

Risk
Weight%Risk
Weighted$m

Cash and short term claims on Government
Long term claims on Government
Claims on banks
Claims on public sector entities
Residential mortgages
Other
Non-risk weighted assets

3,492
0492	10
4,677
20
390
20
49,51050
38,555	100
8,841	
n/a

–
49
935
78
24,75538,555–

Total on-balance sheet exposures

105,957

64,372On-balance sheet exposures

Off-balance sheet exposures

Notional
Principal
Amount$m

CreditConversion
Factor%CreditEquivalent
Amount$m

Average
Risk
Weight%2,461	100
2,461	
49	1,210
1,089	100	1,089
63
683
398
50	199	100	199
119
20
24
62	15

Direct credit substitutes
Commitments with certain drawdown
Transaction related contingent liabilities
Short term self liquidating trade related contingencies
Other commitments to provide financial services
which have an original maturity of one year or more
Other commitments with an original maturity less than
one year or which can be unconditionally cancelled
at any time
Market related contracts1– Foreign exchange– Interest rate
– Equity

94,287462,357
20

4,712
3,969
21	

Total off-balance sheet exposures581,214

13,442		

1

Risk
Weighted
$m

1,934

50

967	100

967

18,549

0

–	100

–

The credit equivalent amounts for market related contracts are calculated using the current exposure method.

25	1,191
21	
848
20
4
5,117

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES48

NOTES TO THE FINANCIAL STATEMENTS (continued)
31. CAPITAL ADEQUACY (continued)
Total Risk Weighted Exposures of the Registered Bank as at 30 September 2006 :Principal
Amount$m

Risk
Weight%Risk
Weighted$m

Cash and short term claims on Government
Long term claims on Government
Claims on banks
Claims on public sector entities
Residential mortgages
Other
Non-risk weighted assets

2,028
824
5,950
425
43,52635,017
5,941

0
10
20
20
50
100
n/a

–
82
1,190
85
21,76335,017–

Total on-balance sheet exposures

93,711		

58,137On-balance sheet exposures

Off-balance sheet exposures

Notional
Principal
Amount$m

CreditConversion
Factor%CreditEquivalent
Amount$m

Average
Risk
Weight%Risk
Weighted
$m

2,056
1,221
376
87

100
100
50
20

2,056
1,221
188
17

46
60
100
97

946
733
188
17

2,351

50

1,175

100

1,175

17,805

Direct credit substitutes
Commitments with certain drawdown
Transaction related contingent liabilities
Short term self liquidating trade related contingencies
Other commitments to provide financial services
which have an original maturity of one year or more
Other commitments with an original maturity less than
one year or which can be unconditionally cancelled
at any time
Market related contracts1– Foreign exchange– Interest rate
– Equity

0

–

100

–

73,016		
253,122		
30		

2,840
1,665
22

26
23
20

745
377
4

Total off-balance sheet exposures

350,064		

9,184		

4,185

The credit equivalent amounts for market related contracts are calculated using the current exposure method.

1

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES49

NOTES TO THE FINANCIAL STATEMENTS (continued)
32. FINANCIAL RISK MANAGEMENT
Strategy in using financial instruments
By their nature, the Banking Group’s activities are principally related to the use of financial instruments including derivatives. The Banking Group
accepts deposits from customers at both fixed and floating rates, and for various periods, and seeks to earn an interest margin by investing these funds
in high quality assets. The Banking Group seeks to increase these margins by consolidating short-term funds and lending for longer periods at higher
rates, while maintaining sufficient liquidity to meet all claims that might fall due.
The Banking Group also seeks to raise its interest margins through lending to commercial and retail borrowers with a range of credit standing. Such
exposures involve not just on-balance sheet loans and advances; the Banking Group also enters into guarantees and other commitments such as lettersof credit and performance, and other bonds.
The Banking Group also trades in financial instruments where it takes positions in traded and over-the-counter instruments, including derivatives, totake advantage of short-term market movements in equities and bonds and in currency and interest rate prices. The Board places trading limits on thelevel of exposure that can be taken in relation to both overnight and intra-day market positions. With the exception of specific hedging arrangements,
foreign exchange and interest rate exposures associated with these derivatives are normally offset by entering into counterbalancing positions, thereby
controlling the variability in the net cash amounts required to liquidate market positions.
Credit risk
The Banking Group takes on exposure to credit risk, which is the risk that a counterparty will be unable to pay amounts in full when due. Impairment
provisions are provided for losses that have been incurred at the balance sheet date. Significant changes in the economy, or in the health of a particularindustry segment that represents a concentration in the Banking Group’s portfolio, could result in losses that are different from those provided for at thebalance sheet date. Management therefore carefully manages its exposure to credit risk.
The Banking Group structures the levels of credit risk it undertakes by placing limits on the amount of risk accepted in relation to one borrower, orgroups of borrowers, and to geographical and industry segments. Such risks are monitored on a revolving basis and subject to an annual or more frequent
review.
The exposure to any one borrower including banks and brokers is further restricted by sub-limits covering on- and off-balance sheet exposures, and daily
delivery risk limits in relation to trading items such as forward foreign exchange contracts. Actual exposures against limits are monitored daily.
Exposure to credit risk is managed through regular analysis of the ability of borrowers and potential borrowers to meet interest and capital repayment
obligations and by changing these lending limits where appropriate. Exposure to credit risk is also managed in part by obtaining collateral and corporate
and personal guarantees, but a portion is personal lending (i.e. credit cards) where no such facilities can be obtained.
Derivatives
The Banking Group maintains strict control limits on net open derivatives positions (i.e. the difference between purchase and sale contracts), by bothamount and term. At any one time, the amount subject to credit risk is limited to the current fair value of instruments that are favourable to the Banking
Group (i.e. assets where their fair value is positive), which in relation to derivatives is only a small fraction of the contract, or notional values used toexpress the volume of instruments outstanding. This credit risk exposure is managed as part of the overall lending limits with customers, together withpotential exposures from market movements. Collateral or other security is not usually obtained for credit risk exposures on these instruments, except
where the Banking Group requires margin deposits from counterparties.
Credit–related commitments
The primary purpose of these instruments is to ensure that funds are available to a customer as required. Guarantees and standby letters of credit (which
represent irrecoverable assurances that the Banking Group will make payments in the event that a customer cannot meet its obligations to third parties)
carry the same credit risk as loans. Documentary and commercial letters of credit (which are written undertakings by the Banking Group on behalf of acustomer authorising a third party to draw drafts on the Banking Group up to a stipulated amount under specific terms and conditions) are collateralisedby the underlying shipments of goods to which they relate and therefore carry less risk than a direct borrowing.
Commitments to extend credit represent unused portions of authorisations to extend credit in the form of loans, guarantees or letters of credit. With
respect to credit risk on commitments to extend credit, the Banking Group is potentially exposed to loss in an amount equal to the total unused
commitments. However, the likely amount of loss is less than the total unused commitments, as most commitments to extend credit are contingent
upon customers maintaining specific credit standards. The Banking Group monitors the term to maturity of credit commitments because longer-term
commitments generally have a greater degree of credit risk than shorter-term commitments.
Foreign currency related risk
The risk related to mismatching of foreign currency assets and liabilities is presented in Note 37 Foreign Currency Risk.

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES50NOTES TO THE FINANCIAL STATEMENTS (continued)
33. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIESThe table below summarises the carrying amounts and fair values of each class of financial assets and liabilities. The methods and significant
assumptions applied in determining fair values are outlined on the following page.
		
30/09/2007
30/09/2006
Carrying
Fair
Carrying
Fair
AmountValue
AmountValue
Consolidated
$m
$m
$m
$m
Financial assets
Liquid assets
Due from other financial institutions
Trading securities
Derivative financial instruments
Available-for-sale assets
Net loans and advances
Other financial assets

4,807
4,807
3,563
3,563
1,877	1,877
4,711	
4,711
48
48
87,87887,607
970
970

2,698
5,617
1,596
2,020
359
78,155
823

2,698
5,617
1,596
2,020
359
77,997823

Total financial assets

103,854	103,583

91,268

91,110Financial liabilities
Due to other financial institutions
Deposits and other borrowings
Derivative financial instruments
Payables and other financial liabilities
Bonds and notes
Related party funding
Loan capital

3,170
3,170
70,03069,9934,924
4,924
1,087	1,087
14,607	14,585
2,775
2,775
2,062
2,038

3,987
63,176
1,997
965
12,468
2,720
1,805

3,987
63,162
1,997
965
12,4692,720
1,802

Total financial liabilities

98,65598,572

87,118

87,102Financial assets
Liquid assets
Due from other financial institutions
Trading securities
Derivative financial instruments
Available-for-sale assets
Net loans and advances
Due from subsidiary companies
Other financial assets

4,807
4,807
3,101	
3,101
1,877	1,877
4,705
4,705
38
38
84,044
83,7801,585	1,585
852
852

2,698
5,111
1,596
2,019
349
74,453
1,505
737

2,698
5,111
1,596
2,019
349
74,311
1,505
737

Total financial assets

101,009	100,745

88,46888,326

Financial liabilities
Due to other financial institutions
Deposits and other borrowings
Due to subsidiary companies
Derivative financial instruments
Payables and other financial liabilities
Bonds and notes
Related party funding
Loan capital

1,686	1,686
58,51458,482
32,94232,931
4,896
4,896
741	
741
561	
550
2,775
2,775
2,062
2,038

2,828
53,59428,648
1,992
755
475
2,720
1,805

2,828
53,58328,656
1,992
755
472
2,720
1,802

Total financial liabilities

104,177	104,099

92,81792,808

ParentANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES51

NOTES TO THE FINANCIAL STATEMENTS (continued)
33. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES (continued)
Methodologies
Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s lengthtransaction.
Quoted market prices, where available, are used as the measure of fair value. In cases where quoted market prices are not available, fair values are basedon present value estimates or other valuation techniques. For the majority of short-term financial instruments, defined as those which reprice or mature
within 90 days or less, with no significant change in credit risk, the fair value was assumed to equate to the carrying amount in the balance sheet.
The fair values are based on relevant information available as at balance date. While judgement is used in obtaining the fair value of financial instruments,
there are inherent weaknesses in any estimation technique. Many of the estimates involve uncertainties and matters of significant judgement, andchanges in underlying assumptions could significantly affect these estimates. Furthermore, market prices or rates of discount are not available for manyof the financial instruments valued and surrogates have been used which may not reflect the price that would apply in an actual sale.
The aggregated fair value amounts do not represent the underlying value of the group.
The fair value amounts have not been updated for the purposes of these financial statements since 30 September 2007, and therefore the fair value ofthe financial instruments subsequent to 30 September 2007 may be different from the amounts reported.
The significant accounting policies in Note 1 describe how the categories of financial assets and financial liabilities are measured and how income andexpenses, including fair value gains and losses, are recognised. The carrying amount and fair value of the Group’s financial assets and financial liabilities
are set out opposite.
Liquid assets and Due from other financial institutions
The carrying values of these financial instruments are considered to approximate their fair values where they are short term in nature or receivable on
demand. Where financial instruments reprice or mature over 90 days, fair values are based on quoted market prices or present value estimates.
Trading securities
Trading securities are carried at fair value. Fair 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.
Derivative financial instruments
Derivative financial instruments are carried at fair value. 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 options valuation models as appropriate.
Available-for-sale assets
Available-for-sale assets are carried at fair value. Fair value is based on quoted market prices, or broker or dealer price quotations. If this information is
not available, fair value has been estimated using quoted market prices for securities with similar credit, maturity and yield characteristics.
Net loans and advances
The carrying value of net loans and advances includes deferred fees and expenses, and is net of provision for credit impairment and income yet tomature. The estimated fair value of net loans and advances is based on the discounted amount of estimated future cash flows and accordingly has notbeen adjusted for provision for credit impairment.
Estimated contractual cash flows for performing loans are discounted at estimated current bank credit spreads to determine fair value. For loans withdoubt as to collection, expected cash flows (inclusive of the value of security) are discounted using a rate which includes a premium for the uncertaintyof the flows.
The difference between estimated fair values of loans and advances and their carrying value reflects changes in interest rates and the credit worthinessof borrowers since loan origination.
Other financial assets
The carrying value of accrued interest and fees receivable approximate their fair values, as they are short term in nature or are receivable on demand.
Deferred tax assets and prepaid expenses are not considered financial assets.
Due to other financial institutions
The carrying value of amounts due to other financial institutions is considered to approximate their fair value where they are short term in natureor payable on demand. Where financial instruments reprice or mature over 90 days, fair values are based on quoted market prices or present value
estimates.
Deposits and other borrowings
The fair value of a deposit liability without a specified maturity or at call is deemed to be the amount payable on demand at the reporting date. The fairvalue 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 without quoted market prices, market borrowing rates of interest for debt with a similar
maturity are used to discount contractual cash flows.
Payables and other financial liabilities
This category includes accrued interest and fees payable for which the carrying amount is considered to approximate their fair value. Income tax
liabilities, other provisions and accrued charges are not considered financial liabilities.
Bonds and notes, related party funding and loan capital
The fair value of bonds and notes and loan capital was calculated based on quoted market prices. For those debt issues where quoted market prices were
not available, a discounted cash flow model using a yield curve appropriate for the remaining term to maturity of the instrument was used. The carrying
value of related party funding is considered to approximate their fair value.

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES52

NOTES TO THE FINANCIAL STATEMENTS (continued)
34. MATURITY ANALYSIS OF ASSETS AND LIABILITIES
Liquidity risk is the risk that the Banking Group and Bank will encounter difficulty in meeting commitments associated with its financial liabilities,
e.g. overnight deposits, current accounts, and maturing deposits; and future commitments, e.g. loan draw-downs and guarantees. The Banking Groupmanages its exposure to liquidity risk by maintaining sufficient liquid funds to meet its commitments based on historical and forecasted cash flow
requirements.
The following maturity analysis of assets and liabilities has been prepared on the basis of the remaining period to contractual maturity as at balancedate. The majority of the longer term loans and advances are housing loans, which are likely to be repaid earlier than their contractual terms.
Deposits include substantial customer deposits which are repayable on demand. However, historical experience has shown such balances to provide
a stable source of long term funding for the Banking Group. When managing liquidity risks, the Banking Group adjusts this contractual profile for
expected customer behaviour.
Total					NoCarrying Less Than
3–12	1–5
BeyondSpecified
Value
3 Months
MonthsYears
5 Years
Maturity
Consolidated – 30/09/2007
$m
$m
$m
$m
$m
$m
AssetsLiquid assets
Due from other financial institutions
Trading securities
Derivative financial instruments
Available-for-sale assets
Net loans and advances
Other assets

4,807
3,563
1,877
4,711	
48
87,878
4,903

Total assets

107,787	18,394	10,922

Liabilities
Due to other financial institutions
Deposits and other borrowings
Derivative financial instruments
Other liabilities
Bonds and notes
Related party funding
Loan capital

3,170
2,356
405
32
70,03053,059	14,726
2,245
4,924
–
–
–
1,516	1,315
96
32
14,607672
4,341	
9,594
2,775
2,775
–
–
2,062
–	100	1,653

377
–
–
–
–
4,924
60	13
–
–
–
–
309
–

Total liabilities

99,08460,177	19,668	13,556

746

4,937

Net liquidity gap
Net liquidity gap - cumulative

8,703
8,703

(41,783)(41,783)

44,597
5,525

3,178
8,703

AssetsLiquid assets
Due from other financial institutions
Trading securities
Derivative financial instruments
Available-for-sale assets
Net loans and advances
Other assets

2,698
5,617
1,596
2,020
359
78,155
5,369

2,698
5,010
1,239
–
313
10,067
1,358

–
378
211
–
–
8,412
175

–
229
51
–
42
20,621
–

–
–
95
–
–
39,364
–

–
–
–
2,020
4
(309)
3,836

Total assets

95,814

20,685

9,176

20,94339,4595,551

Liabilities
Due to other financial institutions
Deposits and other borrowings
Derivative financial instruments
Other liabilities
Bonds and notes
Related party funding
Loan capital

3,987
63,176
1,997
1,428
12,468
2,720
1,805

3,987
47,095
–
1,060
111
2,720
–

–
13,186
–
43
725
–
550

–
2,895
–
76
11,632
–
951

–
–
–
90
–
–
304

–
–
1,997
159
–
–
–

Total liabilities

87,581

54,973

14,504

15,554394

2,156

Net liquidity gap
Net liquidity gap – cumulative

8,233
8,233

(34,288)(34,288)(5,328)(39,616)

5,389(34,227)

39,065
4,838

3,395
8,233

4,807
–
–
–
–
2,650
440	187
286
–
658
396
671	152
–
–
–
–
–
4,711
33	1	13
–	1
9,276
9,906
24,142
44,905(351)
970	179––
3,754
25,013(8,746)	11,457(50,529)(39,072)

45,3438,115

Consolidated – 30/09/2006

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES53NOTES TO THE FINANCIAL STATEMENTS (continued)
34. MATURITY ANALYSIS OF ASSETS AND LIABILITIES (continued)

Parent – 30/09/2007

Total
Carrying
Value$mAssetsLiquid assets
4,807
Due from other financial institutions
3,101	
Trading securities	1,877
Derivative financial instruments
4,705
Available-for-sale assets
38
Net loans and advances
84,044Due from subsidiary companies	1,585
Other assets	12,152

Less Than
3 Months$m

3–12	1–5
Months
Years
$m
$m

4,807
–
2,661	
440
658
396
–
–
33	1	
9,018
9,142
627	148852
308

Beyond No Specified
5 Years
Maturity
$m
$m

–
–
–
–
–
–
671	152
–
–
–
4,705
3
–	1
21,33644,881	
(333)
654	156–––	10,992
22,66445,189	15,365

Liabilities
Due to other financial institutions	1,686	1,584
38
32
Deposits and other borrowings
58,514
44,666	11,756
2,092
Due to subsidiary companies
32,942	15,592
6,725	10,625
Derivative financial instruments
4,896
–
–
–
Other liabilities	1,146
952
39
32
Bonds and notes
561	
–	150
411	
Related party funding
2,775
2,775
–
–
Loan capital
2,062–	100	1,653

30
2
–
–
–
–
–
4,896
–	123
–
–
–
–
309
–

Total assets	112,309	18,656	10,435

Total liabilities	104,582

65,569	18,808	14,845

339

5,021

7,727
7,727

(46,913)(46,913)(8,373)(55,286)

7,819(47,467)

44,850	10,344(2,617)
7,727

AssetsLiquid assets
Due from other financial institutions
Trading securities
Derivative financial instruments
Available-for-sale assets
Net loans and advances
Due from subsidiary companies
Other assets

2,698
5,111
1,596
2,019
349
74,453
1,505
12,126

2,698
4,728
1,239
–
313
9,848
691
737

–
378
211
–
–
7,953
5
296

–
5
51
–
32
17,594
809
–

–
–
95
–
–
39,344
–
–

–
–
–
2,019
4
(286)
–
11,093

Total assets

99,857

20,254

8,843

18,491

39,43912,830Liabilities
Due to other financial institutions
Deposits and other borrowings
Due to subsidiary companies
Derivative financial instruments
Other liabilities
Bonds and notes
Related party funding
Loan capital

2,828
53,59428,648
1,992
1,146
475
2,720
1,805

2,828
41,532
13,580
–
782
–
2,720
–

–
9,340
3,376
–
43
10
–
550

–
2,722
11,692
–
76
465
–
951

–
–
–
–
90
–
–
304

–
–
–
1,992
155
–
–
–

Total liabilities

93,20861,442

13,31915,906394

2,147

Net liquidity gap
Net liquidity gap – cumulative

6,649
6,649

(41,188)(41,188)(4,476)(45,664)

2,585(43,079)

39,045(4,034)

10,683
6,649

Net liquidity gap
Net liquidity gap – cumulative
Parent – 30/09/2006

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES54

NOTES TO THE FINANCIAL STATEMENTS (continued)
35. INTEREST SENSITIVITY GAP AND WEIGHTED AVERAGE INTEREST RATESThe following tables represents the interest rate sensitivity of the Banking Group’s and Bank’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 actualinterest rate sensitivity, for example, those assets and liabilities priced at the Banking Group’s discretion. In such cases, the rate sensitivity is based
upon historically observed and/or anticipated rate sensitivity.
Sensitivity to interest rates arises from mismatches in the period to repricing of assets and that of the corresponding liability funding. Thesemismatches are managed within policy guidelines for mismatch positions.
The majority of the Banking Group’s loan business is conducted domestically in New Zealand and is priced on a fixed rate basis. The majority ofretail deposits are also raised in New Zealand but are either fixed or floating in nature. The mix of repricing maturities in this book is influenced by
the underlying financial needs of customers.
The Banking Group’s offshore operation is wholesale in nature and is able to minimise interest rate sensitivity through closely matching thematurities of loans and deposits. Given both the size and nature of this business, the interest rate sensitivity of this balance sheet contributes little tothe aggregate risk exposure, which is primarily a reflection of the positions in New Zealand.
In New Zealand, a combination of off-balance sheet instruments and pricing initiatives is 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 interest 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 Banking Group policy.
Effective interest rates on hedged transactions within classes of financial assets or liabilities are disclosed inclusive of the impact of the hedging
transaction. However, the financial assets or liabilities carrying values do not incorporate the values of the hedging transactions.
Total
Carrying
Value$m

At Call Or
Less Than
3 Months
$m

7.94%
4,807
8.26%
3,563
8.01%	1,877
n/a
4,711	
9.71%
48
9.17%
87,878
n/a
970

4,606
2,925
742
–
34
33,335
–

–
–
–
–
201
440
–	174
–
24
375
4
629	127
–
–
–
–
–
4,711
–
–	13
–	1
4,051	11,404
39,355
84
(351)
–
–
–
–
970

Total financial assets		103,854

41,642

4,866	11,408

Consolidated – 30/09/2007

Weighted
Effective
Interest
Rate

AssetsLiquid assets
Due from other financial institutions
Trading securities
Derivative financial instruments
Available-for-sale assets
Net loans and advances
Other financial assets

3–6
Months$m

6–12	1–5
MonthsYears$m$m

Beyond Not Bearing
5 Years
Interest$m$m

40,171	

211	

5,556

–

–

–

3,933

4,866	11,408

40,171	

211	

9,489

Liabilities
Due to other financial institutions
6.37%
3,170
2,334
216	189	16
Deposits and other borrowings
6.95%
70,03049,276
7,489
6,261	
2,650
Derivative financial instruments
n/a
4,924
–
–
–
–
Payables and other financial liabilities
n/a	1,087	16
77––
Bonds and notes
8.70%	14,607	13,113	150
379
965
Related party funding
8.25%
2,775
2,775
–
–
–
Loan capital
8.56%
2,062
217
799	100
946

377
–
–
60
–
–
–

38
4,354
4,924
934
–
–
–

3,933

–

Total assets		107,787

41,642

Non-financial assets

n/a–Total financial liabilities		

98,65567,731	

8,731	

6,929

4,577

n/a
n/a

429
8,703

–
–

–
–

–
–

–
–

Total liabilities and equity		107,787

67,731	

8,731	

6,929

4,577

On-balance sheet interest sensitivity gap		
Hedging instruments		

––(26,089)
25,195(3,865)
3,514

4,479
2,371	

35,594(31,707)

(226)
627

(9,893)–

Interest sensitivity gap – net		
Interest sensitivity gap – cumulative

–
–

(894)
(894)

(351)
(1,245)

6,850
5,605

3,887
9,492

401	
9,893

(9,893)–

Non-financial liabilities
Equity437	10,250
–
–

429
8,703

437	19,382

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES55

NOTES TO THE FINANCIAL STATEMENTS (continued)
35. INTEREST SENSITIVITY GAP AND WEIGHTED AVERAGE INTEREST RATES (continued)
Total
Carrying
Value$m

At Call Or
Less Than
3 Months$m

3–6
Months$m

6–12Months
$m

1–5
Years
$m

6.60%
7.28%
7.38%
n/a
6.96%
8.81%
n/a

2,698
5,617
1,596
2,020
359
78,155
823

2,405
5,021
1,245
–
342
32,359
–

–
320
209
–
–
4,822
–

–
8
1
–
–
9,736
–

–
229
46
–
13
31,399
–

–
–
95
–
–
148
–

293
39
–
2,020
4
(309)
823

Total financial assets		

91,26841,372

5,351

9,745

31,687243

2,870

Non-financial assets

n/a

4,546

–

–

–

–

–

4,546

Total assets		

95,814

41,372

5,351

9,745

31,687243

7,416

Liabilities
Due to other financial institutions
5.86%
Deposits and other borrowings
6.20%
Derivative financial instruments
n/aPayables and other financial liabilities
n/a
Bonds and notes
7.60%
Related party funding
7.25%
Loan capital
7.88%

3,987
63,176
1,997
965
12,468
2,720
1,805

3,906
41,762–
5
10,681
2,720
213

–
7,540
–
10
115
–
592

–
5,845
–
–
41
–
550

–
3,899
–
32
1,631
–
450

–
–
–
90
–
–
–

81
4,130
1,997
828
–
–
–

Total financial liabilities		

87,11859,287

8,257

6,436

6,012

90

7,036

Non-financial liabilities
Equity

n/a
n/a

463
8,233

–
–

–
–

–
–

–
–

–
–

463
8,233

Total liabilities and equity		

95,81459,287

8,257

6,436

6,012

90

15,732On-balance sheet interest sensitivity gap		
Hedging instruments		

––(17,915)
24,662(2,906)
1,627

3,309
(2,901)

25,675(23,568)153
180(8,316)–

Interest sensitivity gap – net		
Interest sensitivity gap – cumulative		

–
–

6,747
6,747

(1,279)
5,468

408
5,876

2,107
7,983

333
8,316

(8,316)–

Consolidated – 30/09/2006

Weighted
Effective
Interest
Rate

AssetsLiquid assets
Due from other financial institutions
Trading securities
Derivative financial instruments
Available-for-sale assets
Net loans and advances
Other financial assets

Beyond Not Bearing
5 Years
Interest$m$m

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES56

NOTES TO THE FINANCIAL STATEMENTS (continued)
35. INTEREST SENSITIVITY GAP AND WEIGHTED AVERAGE INTEREST RATES (continued)

Parent – 30/09/2007

Weighted
Effective
Interest
Rate

Total
Carrying
Value$m

At Call Or
Less Than
3 Months$m

3–6
Months$m

6–12	1–5
MonthsYears$m$m

Beyond Not Bearing
5 Years
Interest$m$m

AssetsLiquid assets
7.94%
4,807
4,606
Due from other financial institutions 8.31%
3,101	
2,637
Trading securities
8.01%	1,877
742
Derivative financial instruments
n/a
4,705
–
Available-for-sale assets	10.30%
38
34
Net loans and advances
9.12%
84,04432,602
Due from subsidiary companies
3.55%	1,585	141	Other financial assets
n/a
852
–

–
–
440
–
375
4
–
–
–
–
3,855	11,008
–	140
–
–

–
–
201
–
–
24
629	127
–
–
–
4,705
3
–	1
36,84468(333)
397	156
751
–
–
852

Total financial assets		101,009

40,762

4,670	11,152

37,873n/a	11,300–

Total assets		112,309

40,762

Non-financial assets

–

351	

6,201

–

–

–	11,300

4,670	11,152

37,873351	17,501

Liabilities
Due to other financial institutions
5.15%	1,686	1,562	15
23	16
Deposits and other borrowings
6.68%
58,514
41,294
5,802
4,978
2,086
Due to subsidiary companies
8.41%
32,94228,650	1,778	1,285	1,229
Derivative financial instruments
n/a
4,896
–
–
–
–
Payables and other financial liabilities
n/a
741	16	19––
Bonds and notes
7.50%
561	
261	
–
–
300
Related party funding
8.25%
2,775
2,775
–
–
–
Loan capital
8.56%
2,062
217
799	100
946

30
–
–
–
–
–
–
–

40
4,354
–
4,896
706
–
–
–

74,775

8,413

6,386

4,577

30

9,996

405
7,727

–
–

–
–

–
–

–
–

–
–

405
7,727

Total liabilities and equity		112,309

74,775

8,413

6,386

4,577

On-balance sheet interest sensitivity gap		
Hedging instruments		

––(34,013)
25,234(3,743)
3,514

4,766
2,378

33,296(31,753)

321	
627

(627)
–

Interest sensitivity gap – net		
Interest sensitivity gap – cumulative		––(8,779)(8,779)(229)(9,008)

7,144	1,543(1,864)
(321)

948
627

(627)
–

Total financial liabilities		104,177
Non-financial liabilities
Equityn/an/a30	18,128

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES57

NOTES TO THE FINANCIAL STATEMENTS (continued)
35. INTEREST SENSITIVITY GAP AND WEIGHTED AVERAGE INTEREST RATES (continued)
Total
Carrying
Value$m

At Call Or
Less Than
3 Months$m

3–6
Months$m

6–12Months
$m

1–5
Years
$m

6.60%
7.18%
7.38%
n/a
6.96%
8.80%
4.23%
n/a

2,698
5,111
1,596
2,019
349
74,453
1,505
737

2,405
4,739
1,245
–
342
31,649
472
–

–
320
209
–
–
4,691
140
–

–
8
1
–
–
9,493
–
–

–
5
46
–
3
28,772
240
–

–
–
95
–
–
134
–
–

293
39
–
2,019
4
(286)
653
737

Total financial assets		

88,46840,852

5,360

9,502

29,066229

3,459

Non-financial assets

n/a

11,389

–

–

–

–

–

11,389Total assets		

99,85740,852

5,360

9,502

29,066229

14,848

Liabilities
Due to other financial institutions
5.40%
Deposits and other borrowings
6.03%
Due to subsidiary companies
7.49%
Derivative financial instruments
n/aPayables and other financial liabilities
n/a
Bonds and notes
7.07%
Related party funding
7.25%
Loan capital
7.88%

2,828
53,59428,648
1,992
755
475
2,720
1,805

2,744
35,99523,698
–
5
175
2,720
213

–
5,818
1,607
–
10
–
–
592

–
4,125
1,211
–
–
–
–
550

–
3,526
2,132
–
32
300
–
450

–
–
–
–
90
–
–
–

84
4,130
–
1,992
618
–
–
–

Total financial liabilities		

92,81765,550

8,027

5,886

6,440

90

6,824

Non-financial liabilities
Equity

n/a
n/a

391
6,649

–
–

–
–

–
–

–
–

–
–

391
6,649

Total liabilities and equity		

99,85765,550

8,027

5,886

6,440

90

13,864On-balance sheet interest sensitivity gap		
Hedging instruments		

––(24,698)
24,785(2,667)
1,627

3,616
(2,901)

22,626(23,691)

139
180

984
–

Interest sensitivity gap – net		
Interest sensitivity gap – cumulative		

–
–

87
87

(1,040)
(953)

715
(238)

(1,065)(1,303)

319
(984)

984
–

Parent – 30/09/2006

Weighted
Effective
Interest
Rate

AssetsLiquid assets
Due from other financial institutions
Trading securities
Derivative financial instruments
Available-for-sale assets
Net loans and advances
Due from subsidiary companies
Other financial assets

Beyond Not Bearing
5 Years
Interest$m$m

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES58NOTES TO THE FINANCIAL STATEMENTS (continued)
36. CONCENTRATIONS OF CREDIT RISK
The maximum credit risk of on-balance sheet financial assets is best represented by the carrying amount of the assets, net of any provision for credit
impairment. The credit risk exposure does not take into account the fair value of any collateral, in the event of other parties failing to perform their
obligations under financial instruments.
		On-balance sheet credit exposures

Consolidated
30/09/2007 30/09/2006$m$m

Parent30/09/2007 30/09/2006$m$m

Liquid assets
Due from other financial institutions
Trading securities
Derivative financial instruments
Available-for-sale assets
Net loans and advances
Due from subsidiary companies
Other financial assets

4,807
3,563
1,877
4,711	
48
87,878
–
970

2,698
5,617
1,596
2,020
359
78,155–823

4,807
3,101	
1,877
4,705
38
84,044
1,585
852

2,698
5,111
1,596
2,019
349
74,453
1,505
737

Total on-balance sheet credit exposures

103,854

91,268101,00988,468

Concentrations of credit risk exist if a number of counterparties are engaged in similar activities and have similar economic characteristics thatwould cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions. Analyses of financial
assets by industry sector using Australian and New Zealand Standard Industrial Classification (ANZSIC) codes are as follows:		Concentrations of credit risk by industry

Consolidated
30/09/2007 30/09/2006$m$m

Parent30/09/2007 30/09/2006$m$m

Instalment and personal lending
Real estate mortgages
Agriculture, forestry and fishing
MiningManufacturing
Construction
Retail and wholesale
Transport
Communications
Finance, investment and insurance
Business and personal services
Government and local authority
Electricity, gas and waterEntertainment, leisure and tourism
Other

3,063
53,262
14,383
196
3,133
793
3,194
1,265
187
16,118
1,508
4,639
1,147
964
2

2,906
46,54012,604
144
3,041
713
2,566
1,150
279
15,097
1,393
2,836
1,008
989
2

2,503
53,262
14,114
178
2,773
613
3,007
907
164
15,757
1,378
4,490
918
943
2

2,354
46,54012,370
122
2,642
558
2,491
749
251
14,609
1,299
2,742
764
975
2

Total on-balance sheet credit exposures

103,854

91,268101,00988,468Analyses of financial assets by geographic area are based on the Reserve Bank M3 Institutions Standard Statistical Return criteria.
		Concentrations of credit risk by geographical area

Consolidated
30/09/2007 30/09/2006$m$m

Parent30/09/2007 30/09/2006$m$m

New ZealandOverseas
Exposures not classified in Reserve Bank M3 Return

93,5984,439
5,817

82,3505,891
3,027

92,7102,606
5,693

81,5074,021
2,940

Total on-balance sheet credit exposures

103,854

91,268101,00988,468ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES59NOTES TO THE FINANCIAL STATEMENTS (continued)
36. CONCENTRATIONS OF CREDIT RISK (continued)
Concentrations of credit risk to individual counterparties
The number of individual counterparties other than banks or groups of closely related counterparties of which a bank is a parent (excluding OECD
Governments and connected persons), where the quarter end and peak end-of-day credit exposure equals or exceeds 10% of equity (as at the end of
the quarter) in ranges of 10% of equity, on the basis of limits:
Consolidated
30/09/2007
30/09/2006
Number of Counterparties
Number of Counterparties
		
Peak for		
Peak forAs at
the quarter
As at
the quarter
10% to 20% of equity222
2
As noted above, the number of individual counterparties disclosed within the various equity ranges is based on counterparty limits rather than actual
exposures outstanding. No account is taken of security and/or guarantees which the Banking Group may hold in respect of the various counterparty
limits.
The amount and percentage of quarter end and peak end-of-day credit exposures to individual counterparties other than banks or groups of closely
related counterparties of which a bank is a parent (excluding OECD Governments and connected persons), where the quarter end and peak end-ofday credit exposure equals or exceeds 10% of equity (as at the end of the quarter), by credit rating:Consolidated
30/09/2007
30/09/2006
		% of Total		% of Total
AmountCreditAmountCredit$m
Exposure$m
Exposure
As at
Investment grade credit rating (Note 1)
2,509	100.0%
2,281
100.0%
Peak for the quarter
Investment grade credit rating (Note 1)

2,509	100.0%

2,286

100.0%

Concentrations of credit risk to bank counterparties
The number of bank counterparties or groups of closely related counterparties of which a bank is the parent (excluding OECD Governments andconnected persons), where the quarter end and peak end-of-day credit exposure equals or exceeds 10% of equity (as at the end of the quarter) in
ranges of 10% of equity, on the basis of actual exposures:Consolidated
30/09/2007
30/09/2006
Number of Counterparties
Number of Counterparties
		
Peak for		
Peak forAs at
the quarter
As at
the quarter
10% to 20% of equity

1	

3

2

3

The amount and percentage of quarter end and peak end-of-day credit exposures to bank counterparties or groups of closely related counterparties ofwhich a bank is a parent (excluding OECD Governments and connected persons), where the quarter end and peak end-of-day credit exposure equals
or exceeds 10% of equity (as at the end of the quarter), by credit rating:Consolidated
30/09/2007
30/09/2006
		% of Total		% of Total
AmountCreditAmountCredit$m
Exposure$m
Exposure
As at
Investment grade credit rating (Note 1)
1,193	100.0%
1,700
100.0%
Peak for the quarter
Investment grade credit rating (Note 1)

3,923	100.0%

2,546

100.0%

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES60NOTES TO THE FINANCIAL STATEMENTS (continued)
36. CONCENTRATIONS OF CREDIT RISK (continued)
Concentrations of credit risk to connected persons
Consolidated
30/09/2007% of Group
AmountTier 1	$m
CapitalAggregate at end of period
Connected persons (Note 2)
Non-bank connected persons (Note 3)
Peak end-of-day for the quarter (Note 4)
Connected persons
Non-bank connected persons
Rating-contingent limit (Note 5)
Connected persons
Non-bank connected persons

30/09/2006% of Group
AmountTier 1$m
Capital

1,952
–

38.1%
0.0%

1,191
–

25.2%
0.0%

2,299
–

44.9%
0.0%

1,826
–

38.6%
0.0%

n/a
75.0%
n/a	15.0%

n/a
n/a

70.0%
15.0%

The credit exposure concentrations disclosed for connected persons are on the basis of actual gross exposures and exclusive of exposures of a capitalnature. The peak end-of-day credit exposures for the quarter to connected persons are measured over Tier 1 Capital as at the end of the quarter. There
were no individual provisions provided against credit exposures to connected persons as at 30 September 2007 (30/09/2006 $nil). The Banking
Group had no contingent exposures arising from risk lay-off arrangements to connected persons as at 30 September 2007 (30/09/2006 $nil).
Note 1
All of the individual and bank counterparties included in the above tables have an investment grade rating. An investment grade credit rating meansa credit rating of BBB- or Baa3 or above, or its equivalent. In the case of a group of closely related counterparties, the credit rating applicable is thatof the entity heading the group of closely related counterparties. The credit rating is applicable to an entity’s long term senior unsecured obligations
payable in New Zealand, in New Zealand dollars, or to an entity’s long term senior unsecured foreign currency obligations.
Note 2The Banking Group has amounts due from its Parent Company and Ultimate Parent Company and other entities within the Ultimate Parent Grouparising from the ordinary course of its business. These balances arise primarily from unrealised gains on trading and hedging derivative financial
instruments with the Ultimate Parent Bank.
Note 3
Non-bank connected persons exposures consist of loans to directors of the Bank. All loans were made in the ordinary course of business of the Bank,on an arm’s length basis and on normal commercial terms and conditions.
Note 4The method of calculating the peak end-of-day disclosure above differs from that applied in determining the connected persons’ limit under the
Bank’s Conditions of Registration. The peak end-of-day disclosure is measured against Tier 1 Capital at quarter end whereas the connected persons’
exposure under the Conditions of Registration is measured against Tier 1 Capital on a continuous basis. The Banking Group has complied with thelimits on aggregate credit exposures (of a non-capital nature and net of individual provisions) to connected persons and non-bank connected persons,as set out in the Conditions of Registration, at all times during the quarter.
Note 5
Represents the maximum peak end-of-day aggregate credit exposures limit (exclusive of exposures of a capital nature and net of individual
provisions) to all connected persons. This is based on the rating applicable to the Bank’s long term senior unsecured NZD obligations payable in
New Zealand, in New Zealand dollars (refer page 83 for the credit rating). Within the overall limit a sub-limit of 15% of Tier 1 Capital applies toaggregate credit exposures (exclusive of exposures of a capital nature and net of individual provisions) to non-bank connected persons. During theJune quarter, the connected persons’ limit increased from 70% to 75% as a result of an improvement in the Bank’s credit rating.

37. FOREIGN CURRENCY RISKThe net open position in each foreign currency, detailed in the table below, represents the net on-balance sheet assets and liabilities in that foreign
currency aggregated with the net expected future cash flows from off-balance sheet purchases and sales from foreign exchange transactions in that
foreign currency. The amounts are stated in New Zealand dollar equivalents translated using the spot exchange rates as at balance sheet date.
		Net open position
Australian dollar
Euro
Pound sterling
US dollar
Other

Consolidated
30/09/2007 30/09/2006$m$m

Parent30/09/2007 30/09/2006
$m
$m

(10)
13
(1)
2
2

33
(9)
(1)
35
–

(10)
13
(1)
2
2

33
(9)
(1)
35
–

6

58

6

58

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES61

NOTES TO THE FINANCIAL STATEMENTS (continued)
38. CONCENTRATIONS OF FUNDING
		Concentrations of funding by industry

Consolidated
30/09/2007 30/09/2006$m$m

Parent30/09/2007 30/09/2006$m$m

Agriculture, forestry and fishing
MiningManufacturing
Construction
Retail and wholesale
Transport
Communications
Finance, investment and insurance
Business and personal services
Government and local authority
Electricity, gas and waterEntertainment, leisure and tourism
Households

2,010
1,428
1,429
693
1,255
582
116
43,727
5,067
1,366
178
559
34,234

1,749
1,301
1,346
661
1,181
577
92
38,095
4,909
1,295
602
507
31,841

2,010
1,428
1,429
693
1,255
582
116
51,409
5,067
1,366
178
559
32,448

1,749
1,301
1,346
661
1,181
577
92
46,283
4,909
1,295
402
507
29,767

Total concentrations of funding by industry

92,644

84,156

98,54090,070Concentrations of funding by productDue to other financial institutions
Certificates of deposits
Term deposits
Other deposits bearing interest
Deposits not bearing interest
Commercial paper
Secured debenture stock
Secured deposits
Due to subsidiary companies
Bonds and notes
Related party funding
Loan capital

3,170
4,447
28,99821,128
4,354
9,317
1,786
–
–
14,607
2,775
2,062

3,987
3,941
25,931
20,007
4,130
6,890
2,077
200
–
12,468
2,720
1,805

1,686
4,447
28,99820,715
4,354–––
32,942
561	
2,775
2,062

2,828
3,941
25,931
19,5924,130–––
28,648
475
2,720
1,805

Total concentrations of funding by product92,644

84,156

98,54090,070Concentrations of funding by geographical area
New ZealandOverseas

57,55735,08754,41629,74064,80233,73861,46028,610Total concentrations of funding by geographical area

92,644

84,156

98,54090,070Analyses of funding by geographic area are based on the Reserve Bank M3 Institutions Standard Statistical Return criteria.

39. 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.
RBNZ Market Risk Disclosure
The aggregate market risk exposures below have been calculated in accordance with clause 1 (1) (a) of Schedule 7 of the Order. Aggregate foreign
currency risk exposures have been calculated in accordance with clause 8 (a) of Schedule 8 of the Order. Aggregate interest rate risk exposures havebeen calculated in accordance with clause 1 (b) of Schedule 8 of the Order. Aggregate equity risk exposures have been calculated in accordancewith clause 11 (a) of Schedule 8 of the Order. The peak end-of-day market risk exposures for the quarter are measured over equity at the end of thequarter.
		
30/09/2007
30/09/2006
Peak forPeak for
Exposures to market risk
As at the quarter
As at the quarter
1.3

6.5

6.0

19.3

Aggregate foreign currency exposures as a percentage of equity

0.0%

0.1%

0.1%

0.2%

Aggregate interest rate exposures ($ million)

302.2

373.4

250.9

318.9

Aggregate interest rate exposures as a percentage of equity

3.5%

4.3%

3.1%

3.9%

Aggregate foreign currency exposures ($ million)

Aggregate equity exposures ($ million)
Aggregate equity exposures as a percentage of equity

0.2

0.2

0.5

0.5

0.0%

0.0%

0.0%

0.0%

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES62

NOTES TO THE FINANCIAL STATEMENTS (continued)
40. SECURITISATION, FUNDS MANAGEMENT, OTHER FIDUCIARY ACTIVITIES AND THE MARKETING AND DISTRIBUTION
OF INSURANCE PRODUCTS
Securitisation
The Banking Group has not securitised any of its own assets. The Banking Group is involved in providing banking services to customers who
securitise assets.
Funds management
Certain subsidiaries of the Bank act as trustee and/or manager for a number of unit trusts and superannuation funds. The Bank provides privatebanking services to a number of clients, including investment advice and portfolio management. The Banking Group is not responsible for any
decline in performance of the underlying assets of the investors due to market forces.
As funds under management are not owned by the Banking Group, they are not included in these financial statements. The Banking Group derives
fee and commission income from the sale and management of superannuation bonds, unit trusts and the provision of private banking services to anumber of clients.
Some funds under management are invested in products owned by the Banking Group and are recorded as liabilities in the balance sheet. At 30
September 2007, $1,035 million of funds under management were invested in the Banking Group’s own products (30/09/2006 $811 million).
Funds management activities conducted by the ING NZ joint venture are not included in the funds managed by the Banking Group, as the Banking
Group does not have control of the ING NZ joint venture.
The aggregate value of funds managed by the Banking Group at balance date was:
Consolidated
30/09/2007
30/09/2006$m$m
Superannuation schemes
Bonus Bonds
Discretionary funds

3
2,488
2,045

6
2,397
1,695

Totals funds under management

4,536

4,098

No funding was provided to funds managed by the Banking Group during the quarter ended 30 September 2007 (30/09/2006 $nil).
Custodial services
The Banking Group provides custodial services to customers in respect of assets that are beneficially owned by those customers.
Marketing and distribution of insurance products
The Bank markets and distributes a range of insurance products which are underwritten by several insurance companies. These activities aremanaged in association with the ING NZ joint venture.
The Banking Group mitigates its exposure to implicit risk by meeting the RBNZ minimum separation requirements. In particular, the Banking
Group discloses as required that it does not guarantee any issuer of insurance products nor the products issued, that the insurance policies do not
represent deposits or other liabilities of the Banking Group, that the insurance policies are subject to investment risk, including possible loss of
income and principal, and that the Banking Group does not guarantee the capital value or performance of the policies.
Any financial services (including funding and liquidity support) provided by the Banking Group to securitisation, funds management and custodialservices entities, or issuers of marketed and distributed insurance products are made on an arm’s length basis and at fair value. Any securities orassets purchased from such entities have been purchased on an arm’s length basis and at fair value.
Insurance business
The Banking Group does not conduct any insurance business directly, although the Banking Group holds a 49% share in the ING NZ joint
venture.

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES63

NOTES TO THE FINANCIAL STATEMENTS (continued)
41. CONTINGENT LIABILITIES AND CREDIT RELATED COMMITMENTS
The credit risk exposure of contingent liabilities and credit related commitments has been based upon the risk weighted credit equivalent amounts
determined in accordance with the Reserve Bank of New Zealand’s capital adequacy guidelines. The estimated face or contract values and credit
equivalent amounts are as follows:
30/09/2007
30/09/2006
Face orCreditFace orCreditContract EquivalentContract Equivalent
Value
AmountValue
AmountCredit related commitments
$m
$m
$m
$m
Consolidated
Commitments with certain drawdown due within one year
Commitments to provide financial services

1,074	1,074
20,751	
998

1,221
20,338

1,221
1,175

Total credit related commitments

21,825

2,072

21,5592,396

ParentCommitments with certain drawdown due within one year
Commitments to provide financial services

1,074	1,074
20,483967

1,221
20,156

1,221
1,175

Total credit related commitments

21,557

2,041

21,3772,396

Consolidated
Financial guarantees1
Standby letters of credit
Transaction related contingent items
Trade related contingent liabilities

1,933	1,933
528
528
398	199
123
25

1,688
368
376
89

1,688
368
188
18

Total contingent liabilities

2,982

2,685

2,521

2,262

ParentFinancial guarantees1
Standby letters of credit
Transaction related contingent items
Trade related contingent liabilities

1,933	1,933
528
528
398	199
119
24

1,688
368
376
87

1,688
368
188
17

Total contingent liabilities

2,978

2,519

2,261

Contingent liabilities

2,684

The Banking Group guarantees the performance of customers by issuing standby letters of credit and guarantees to third parties, including its
ultimate parent company. The risk involved is essentially the same as the credit risk involved in extending loan facilities to customers, therefore
these transactions are subjected to the same credit origination, portfolio management and collateral requirements for customers applying for loans.
As the facilities may expire without being drawn upon, the notional amounts do not necessarily reflect future cash requirements.
With effect from 1 October 2006, financial guarantee contracts are recognised initially at fair value. After initial recognition, such contracts aremeasured at the higher of the amount determined in accordance with NZ IAS 37: Provisions, Contingent Liabilities and Contingent Assets, or theamount initially recognised. There was no financial impact on adoption of this amendment to NZ IAS 39: Financial Instruments: Recognition andMeasurement.
1

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES64

NOTES TO THE FINANCIAL STATEMENTS (continued)

41. CONTINGENT LIABILITIES AND CREDIT RELATED COMMITMENTS (continued)
The detailed and estimated maximum amount of contingent liabilities that may become payable are set out below.
Contingent tax liability
As previously disclosed, the New Zealand Inland Revenue Department (‘IRD’) is reviewing a number of structured finance transactions as part of anaudit of the 2000 to 2005 tax years. This is part of an industry-wide review by the IRD of these transactions undertaken in New Zealand.
The Bank has received Notices of Proposed Adjustment (the ‘Notices’) in respect of some of these transactions. The Notices are formal advice that
the IRD is proposing to amend tax assessments. The Notices are not tax assessments and do not establish a tax liability but are the first step in a formal
disputes process.
As expected in March 2007 the IRD issued amended tax assessments as a follow up to the Notices in respect of five of these transactions for the 2002
tax year (prior to that tax year becoming statute-barred). The IRD has previously issued tax assessments as a follow up to the Notices in respect of two
transactions for the 2000 tax year and in respect of four transactions for the 2001 tax year (in each case prior to that tax year becoming statute-barred).
Proceedings disputing the amended tax assessments with respect to the 2000, 2001 and 2002 tax years have been commenced.
Based on the independent tax and legal advice obtained, the Bank is confident that the tax treatment it has adopted for these transactions and all similartransactions is correct.
The tax adjustments proposed so far by the IRD cover the 2000 to 2005 tax years and imply a maximum potential liability of $224 million ($321 million
with interest tax effected).
The IRD is also investigating other transactions undertaken by the Banking Group, which have been subject to the same tax treatment. Should the same
position be taken by the IRD for all years on all these transactions, including those that the Notices cover, the maximum potential liability would beapproximately $365 million ($506 million with interest tax effected) as at 30 September 2007.
Of the maximum potential tax liability in dispute, it has been estimated that approximately $99 million ($142 million with interest tax effected) is subject
to indemnities given by Lloyds TSB Bank plc under the agreement by which the Bank acquired the NBNZ Holdings Limited Group, and which relate
to transactions undertaken by NBNZ Group before December 2003.
This leaves a net potential tax liability as at 30 September 2007 of $266 million ($364 million with interest tax effected).
All of these transactions have now either matured or been terminated.
Other contingent liabilities
In November 2006, the Commerce Commission brought proceedings under the Commerce Act 1986 against Visa, MasterCard and all New Zealandissuers of Visa and MasterCard credit cards, including ANZ National Bank Limited. The Commission alleges price fixing and substantially lessening
competition in relation to the setting of credit card interchange fees and is seeking penalties and orders under the Commerce Act.
Subsequently, several major New Zealand retailers have issued proceedings against ANZ National Bank Limited and the other abovementioned
defendants seeking unquantified damages, based on allegations similar to those contained in the Commerce Commission proceedings.
ANZ National Bank Limited is defending the proceedings. At this stage, the risks and any potential liabilities cannot be assessed.

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES65NOTES TO THE FINANCIAL STATEMENTS (continued)
42. COMMITMENTS		Consolidated
30/09/2007 30/09/2006$m$m

Parent30/09/2007 30/09/2006$m$m

Capital expenditure
Contracts for outstanding capital expenditure:
Premises and equipment
Not later than 1 year

15

38

1	

–

Total capital expenditure commitments

15

38

1	

–

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

85
163
32

79
172
39

20
28
–

19
39
–

Total lease rental commitments

280

290

48

58

Total commitments

295

328

49

58

Lease rentals
Future minimum lease payments under
non-cancellable operating leases:

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

43. INTEREST EARNING AND DISCOUNT BEARING ASSETS AND LIABILITIES		Consolidated
30/09/2007 30/09/2006$m$m

Parent30/09/2007 30/09/2006$m$m

Interest earning and discount bearing assets

98,29888,39894,80885,009Interest and discount bearing liabilities

88,40580,082

94,181	

85,993

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES66

NOTES TO THE FINANCIAL STATEMENTS (continued)
44. SEGMENTAL ANALYSIS
For segment reporting purposes, the Banking Group is organised into three major business segments – Retail Banking, Relationship Banking andInstitutional. Centralised back office and corporate functions support these segments.
A summarised description of each business segment is shown below:
Retail Banking

Provides banking products and services to individuals and small businesses through separate ANZ and The National Bank
branded distribution channels and UDC. Personal banking customers have access to a wide range of financial services andproducts. Small business banking services are offered to enterprises with annual revenues of less than $5 million. Includedin this segment is Private Banking, a stand-alone business unit, which offers a fully inclusive banking and investment
service to high net worth individuals. Includes profit centres supporting the Retail Banking segment (e.g. Direct Banking
and the ING NZ joint venture). UDC is primarily involved in the financing and leasing of equipment, plant and machinery
for small and medium sized businesses.
Relationship Banking This segment provides services to rural, commercial and corporate customers. A full range of banking products and services
are provided to Rural customers. Corporate and Commercial customers consist of medium to large businesses with annual
revenues from $2 million to $150 million. The Banking Group’s relationship with these businesses ranges from simple
banking requirements with revenue from traditional lending and deposit products, to more complex arrangements withrevenue sourced from a wider range of products.
Institutional
Comprises businesses that provide a full range of financial services to the Banking Group’s client base.
The Institutional business unit is made up of the following specialised units:– Institutional Banking – manages customer relationships along industry segment lines, typically with wholesale clientswith turnover greater than $100 million.
– Corporate Finance – provides specialist lending, underwriting and capital structuring and solutions to corporates,
institutions and governments.
– Markets – provides securities, derivatives and foreign exchange products and services to the Banking Group’s clientbase.
– Working Capital – provides trade finance, cash management, international payments, clearing and custodian services tothe Banking Group’s client base.
Other
Includes Treasury and back office support functions, none of which constitutes a separately reportable segment. Truck
Leasing Limited (trading as Esanda FleetPartners) is classified as a discontinued operation, and is included in the “Other”
segment.
As the composition of segments has changed over time, prior period comparatives have been adjusted to be consistent with the 2007 segment
definitions.
RetailRelationship
Consolidated – 30/09/2007
Banking
Banking
Institutional
Other
Total
$m
$m
$m
$m
$m
Continuing operations1, 2External interest income
4,200
2,465	1,630	14
8,309
External interest expense(2,095)(528)(1,507)(1,929)(6,059)Net intersegment interest(809)(1,349)41	
2,117–
588	164

202

2,250

486

66

265

20

837

22

–

2

–

24

Net operating income	1,804

654

431	

222

3,111

Other external expenses
Net intersegment and related party expenses3

600	109363	10989
48

462	1,260(449)
71

Operating expenses

963

218	137	13	1,331

Profit before provision for credit impairment and income tax

841	

436

294

209	1,780

Provision for credit impairment

57

21	

(3)

(1)

Profit before income tax
Income tax expense784
415
248	137297
210	1,706
87	142
614

Profit after income tax

536

278

210

–

–

–

536

278

Net interest income	1,296
Other external operating income
Share of profit of equity accounted associates
and jointly controlled entities

Discontinued operation
Profit from discontinued operation (net of income tax)
Profit after income tax
Non-cash expenses
Depreciation and amortisation

74

68	1,09276

76

210	144	1,168

9

–	1	

Balance sheet
Total external assets
52,534
Share in associates and jointly controlled entities	189
Total external liabilities
36,76430,045
21,172–	15
8,628
25,59445

55

4,036	107,787
2
206
28,09899,084

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES67NOTES TO THE FINANCIAL STATEMENTS (continued)
44. SEGMENTAL ANALYSIS (continued)

RetailBanking$m

RelationshipBanking$m

Institutional
$m

Other
$m

Total
$m

3,634
(1,790)
(651)

2,044
(454)
(1,065)1,370(1,041)(88)

158(1,792)
1,804

7,206
(5,077)–

Net interest income
Other external operating income
Share of profit of equity accounted associates
and jointly controlled entities

1,193
463

525
63

241
231

170
23

2,129
780

22

–

–

–

22

Net operating income

1,678

588

472

193

2,931

Other external expenses
Net intersegment and related party expenses3

577
348

100
102

82
46

488
(420)

1,247
76

Operating expenses

925

202

128

68

1,323

Profit before provision for credit impairment and income tax

753

386

344

125

1,608

Provision for credit impairment

16

(10)

12

–

18

Profit before income tax
Income tax expense

737
234

396
131

332
101

125
57

1,590
523

Profit after income tax

503

265

231

68

1,067

–

–

–

5

5

Profit after income tax

503

265

231

73

1,072

Non-cash expenses
Depreciation and amortisation

10

–

1

129

140

46,835167
33,74625,841–
8,070

18,633
8
20,6904,505
225,075

95,814
177
87,581

Consolidated – 30/09/2006
Continuing operations1, 2External interest income
External interest expense
Net intersegment interest

Discontinued operation
Profit from discontinued operation (net of income tax)

Balance sheet
Total external assets
Share in associates and jointly controlled entities
Total external liabilities

Geographic segment analysis
The Banking Group operates predominantly in New Zealand. No other geographic segments are reportable secondary segments.
Results are equity standardisedIntersegment transfers are accounted for and determined on an arm’s length or cost recovery basis.
3
Net intersegment expenses are eliminated at the ultimate parent bank level.
12ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES68NOTES TO THE FINANCIAL STATEMENTS (continued)
45. NOTES TO THE CASH FLOW STATEMENTS		Consolidated
30/09/2007 30/09/2006$m$m

Parent30/09/2007 30/09/2006$m$m

Reconciliation of profit after income tax to net cash flows used inoperating activities
1,168

1,072

1,776

611

55
74
3
12
45

140
19
6
10
31

25
75
1	
12
45

31
16
8
10
31

Deferrals or accruals of past or future operating cash receipts
or payments:
Increase in operating assets and liabilities
Increase in interest receivable
Increase in interest payable(Increase) decrease in accrued income
Increase (decrease) in accrued expenses(Decrease) increase in provisions
Amortisation of premiums and discounts
Decrease (increase) in income tax assets(Decrease) increase in income tax liabilities(2,773)
(94)
242
(1)
28
(9)
46
113
(12)

(5,785)
(88)
74
(1)
(13)
9
12
(3)
63

(3,546)
(104)
166
(1)
25
(4)
46
99
(5)

(5,065)
(65)
26
1
(7)
9
12
(31)
56

Items classified as investing/financing:
Share of profit of equity accounted associates and   jointly controlled entities
Gain on disposal of controlled entities
Gain on disposal of associates and jointly controlled entities
Gain on disposal of premises and equipment

(24)
(76)
(2)
–

(22)
–
(2)
–

(22)
–
–
(1)

(22)
–
–
(1)

(1,205)(4,478)(1,413)(4,380)

Profit after income tax
Non-cash items:
Depreciation and amortisation
Provision for credit impairment
Deferred fee revenue and expenses
Share-based payments expense
Amortisation of capitalised brokerage/ loan origination fees

Net cash flows used in operating activities

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES69

NOTES TO THE FINANCIAL STATEMENTS (continued)
46. RELATED PARTY TRANSACTIONS		Consolidated
30/09/2007 30/09/2006
$000
$000

Parent30/09/2007 30/09/2006
$000
$000

Key management personnel
Key management personnel compensation
Salaries and short-term employee benefits
Post-employment benefits
Other long-term benefits
Termination benefits
Share-based payments

10,407
315
106
–
2,144

10,744
364
147
2,218
1,992

9,929
315
87
–
2,124

10,473
364
144
1,931
1,974

Total compensation of key management personnel

12,972

15,465

12,455

14,886Loans to key management personnel

6,202

7,308

6,202

7,304

Deposits from key management personnel

2,666

4,500

2,649

4,495

Loans made to and deposits held by key management personnel (including personally related parties) are made in the course of ordinary business onnormal commercial terms and conditions no more favourable than those given to other employees or customers. Loans are on terms of repaymentthat range between fixed, variable and interest only, all of which have been made in accordance with the Bank’s lending policies. No provision for
credit impairment has been recognised for loans made to key management personnel (30/09/2006 $nil).
All other transactions with key management personnel (including personally related parties) are conducted on an arm’s length basis in the ordinary
course of business and on commercial terms and conditions. These transactions principally consist of the provision of financial and investment
services.
Key management personnel is defined as those persons having authority and responsibility for planning, directing and controlling the activities ofthe entity, directly or indirectly, including directors (whether executive or otherwise).
Transactions with the Parent Company, Ultimate Parent Company and subsidiaries
Details of amounts provided by/to the Parent Company, Ultimate Parent Company and subsidiaries of the Banking Group during the ordinary courseof business are set out in the relevant notes to these financial statements. No provision for credit impairment has been recognised during the year
ended 30 September 2007 (30/09/2006 $nil).
		Consolidated
Parent30/09/2007 30/09/2006
30/09/2007 30/09/2006
$m
$m
$m
$m
Interest income– Subsidiary Companies– Parent Company– Ultimate Parent Company
Interest expense– Subsidiary Companies– Parent Company– Ultimate Parent Company
Operating expenses– Subsidiary Companies– Ultimate Parent Company

–
13
4

–
11
–

84
13
4

79
11
–

–
211	
202

–
190
141

2,210
211	
57

1,824
190
48

–
71	

–
76

96
71	

83
76

Transactions with associates and joint venture entities
During the year the Banking Group conducted transactions with associates and joint venture entities on normal commercial terms and conditions
as shown below:
		Consolidated
Parent30/09/2007 30/09/2006
30/09/2007 30/09/2006
Aggregate
$m
$m
$m
$m
Amounts receivable– associates– joint venture entities
Interest income– associates– joint venture entities
Commission received from ING New Zealand joint venture
Costs recovered from ING New Zealand joint venture

14
56

18
140

–
14

18
121

1	
8

2
7

–
4

1
6

23
1	

23
2

23
1	

23
2

The Banking Group provided registry services to the ING New Zealand joint venture in connection with the business of ING Managed Funds (NZ)
Limited until 31 December 2006.
The Banking Group provided payroll, tax accounting and compliance services, and premises in connection with and for the purpose of ING
Insurance Services (NZ) Limited and ING Managed Funds (NZ) Limited. All provision of services ceased from 5 March 2007.
A provision for credit impairment of $7 million is recognised for amounts outstanding from associates as at 30 September 2007 (30/09/2006 $16
million). A credit impairment loss of $1 million was recognised during the year ended 30 September 2007 (30/09/2006 $6 million).

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES70

NOTES TO THE FINANCIAL STATEMENTS (continued)
47. CONTROLLED ENTITIES, ASSOCIATES AND INTERESTS IN JOINTLY CONTROLLED ENTITIES
Ownership
Controlled entities
Interest %Airlie Investments Limited
100
Alos Holdings Limited
100
Amberley Investments
50
ANZ Capital NZ Limited
100
ANZ Investment Services (New Zealand) Limited
100
ANZ National (Int’l) Limited
100
ANZ National Staff Superannuation Limited
100
APAC Investments Limited
65
Arawata Assets Limited
100
Arawata Capital Limited
100
Arawata Finance Limited
100
Arawata Funding Limited
100
Arawata Holdings Limited
100
Arawata Securities Limited
100
Arawata Trust100
Arawata Trust Company
100
BHI Limited
100
CBC Finance Limited (incorporated in United Kingdom)
100
Control Nominees Limited
100
Cortland Finance Limited
100
Corvine Investments Limited
100
Culver Finance Limited
100
Direct Broking Limited
100
Direct Nominees Limited
100
EFTPOS New Zealand Limited
100
Endeavour Caterpillar New Zealand Finance Company
50
Endeavour Finance Limited
100
Endeavour Securities Limited
100
General Finance Custodians Limited–
Harcourt Corporation Limited
100
Harcourt Investments Limited
100
Karapiro Investments Limited
100
Marmion Trust–
National Bank of New Zealand Custodians Limited
100
NBNZ Finance Limited
100
NBNZ Holdings Hong Kong Limited (incorporated in Hong Kong)
100
NBNZ Holdings Limited
100
Nerine Finance No. 2
65
Origin Mortgage Management Services Limited–
Pioneer First Limited–
Private Nominees Limited
100
Rural Growth Fund Limited
100
Sefton Finance Limited
100
South Pacific Merchant Finance Limited
100
Southpac Corporation Limited
100
Trillium Holdings Limited
100
Tui Endeavour Limited
100
Tui Securities Limited
100
UDC Finance Limited
100

BalanceDates
30 September
30 September
31 December
30 September
30 September
30 September
30 September
30 September
30 September
30 September
30 September
30 September
30 September
30 September
30 September
30 September
30 September
31 December
30 September
30 September
30 September
30 September
30 September
30 September
30 September
30 September
30 September
30 September
31 March
30 September
30 September
30 September
31 December
30 September
30 September
31 December
30 September
31 December
31 March
31 March
30 September
30 September
30 September
30 September
30 September
30 September
30 September
30 September
30 September

Nature of business
Investment company
Investment company
Finance company
Investment company
Funds management company
Finance company
Staff superannuation scheme trustee
Finance company
Property company
Investment company
Investment company
Investment company
Investment company
Finance company
Finance entity
Investment company
Investment company
Finance company
Finance company
Investment company
Investment company
Investment company
On-line share broker
Non operative
Eftpos service provider
Investment company
Investment company
Investment company
Mortgage finance
Investment company
Investment company
Non operative
Finance entity
Nominee and custody services
Finance company
Non operative
Finance company
Finance company
Mortgage financeMortgage financeNominee company
Investment company
Investment company
Investment company
Investment company
Finance company
Investment company
Investment company
Finance company

All controlled entities are incorporated in New Zealand, unless stated.
For all controlled entities, with the exception of Amberley Investments, General Finance Custodians Limited, Origin Mortgage Management
Services Limited and Pioneer First Limited, the ownership interest percentage equates to the voting power held. No voting interest is held in
Amberley Investments.
In relation to Amberley Investments, control exists through the majority of benefits arising as a result of holding debentures.
In relation to General Finance Custodians Limited, Origin Mortgage Management Services Limited and Pioneer First Limited control exists throughthe Banking Group having 100% of the voting rights.
In relation to Endeavour Caterpillar New Zealand Finance Company, control exists through the ability to cast, or control the casting of more thanhalf of the votes that are likely to be cast at a general meeting over significant matters.
In relation to Marmion Trust, control exists through the undertaking of the majority of variability of risks and rewards.
Movements in controlled entities
On 31 October 2006, UDC Finance Limited sold Truck Leasing Limited for consideration of $147 million. A gain on sale of $76 million was realised
as disclosed in Note 10 Discontinued Operations.
On 7 November 2006, the Banking Group exited its controlling interest in Starz Trust (65% ownership).
On 20 December 2006, the Banking Group entered into a transaction via its subsidiary, Arawata Funding Limited, resulting in the consolidation ofMarmion Trust.
On 30 April 2007, Rural Growth Fund Limited was incorporated as a subsidiary of the Bank.

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES71

NOTES TO THE FINANCIAL STATEMENTS (continued)
47. CONTROLLED ENTITIES, ASSOCIATES AND INTERESTS IN JOINTLY CONTROLLED ENTITIES (continued)
Book Value$m

VotingInterest %Ownership
Interest %Balance
Dates

Nature of business

Cards NZ Limited
Electronic Transaction Services Limited
EXCCL Limited
Mondex New Zealand Limited
UCG Investments Limited
Wyma Engineering (NZ) Limited

–
2
–
–
6
2

25
25
45
40
43
31

15
25
81
40
43
31

30 September
31 March
30 September
31 December
31 March
31 March

Card services
Eftpos settlements
Plastics manufacturing and recycling
Card services
Rest home operator
Agricultural machinery supplier

Total shares in associates

10

Associates

All associates are incorporated in New Zealand.
Associates will adopt NZ IFRS in 2007. There are not expected to be any material impacts on the Banking Group when the associates adopt NZ
IFRS.
Movements in associates
On 8 March 2007, ANZ Capital NZ Limited acquired a 31% ownership interest in Wyma Engineering (NZ) Limited.
On 29 June 2007, the Banking Group exited its interest in Green Acres Franchise Group Limited (43% ownership).
On 1 August 2007, Chequer Corporation Limited changed its name to EXCCL Limited.
On 31 August 2007, ANZ Capital NZ Limited acquired a 43% ownership interest in UCG Investments Limited.

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES72

NOTES TO THE FINANCIAL STATEMENTS (continued)
47. CONTROLLED ENTITIES, ASSOCIATES AND INTERESTS IN JOINTLY CONTROLLED ENTITIES (continued)
Jointly controlled entities

Book Value$m

Argenta Limited
BCS Group Limited
ING (NZ) Holdings Limited
JMI Aerospace Limited

2
4
189
1

Total shares in jointly
controlled entities

196

VotingOwnership
Interest % Interest %
24
40
50
33

24
40
49
33

Balance
Dates

Nature of business

31 July
30 June31 December
31 March

Manufacture and marketing of animal remedies
Manufacturer of baggage handling systems
Funds management and insurance
Airline maintenance and service provider

All jointly controlled entities are incorporated in New Zealand.
The Banking Group has joint control of all these entities due to a combination of control factors, none of which gives either party overall control.
Jointly controlled entities ventures adopted NZ IFRS in 2007. There were no material impacts on the Banking Group on adoption of NZ IFRS.
The summarised financial information relating to the Banking Group’s investment in ING (NZ) Holdings Limited is as follows:
Parent and Consolidated
30/09/2007
30/09/2006$m$m
Share of assets and liabilities
Investments
Other assets

81	
160

80
176

Total assets

241	

256

Life insurance policy liabilities
Other liabilities

22
11	

52
18

Total liabilities

33

70

Net assets

208

186

Share of revenue, expenses and results
Net underwriting result
Other revenue

49
29

32
35

Total revenue
Expenses

78
56

67
44

Profit before income tax
Income tax expense

22
–

23
1

Profit after tax

22

22

Share of commitments
Lease commitments

4

3

There are no unrecognised losses in respect of any of the Banking Group’s jointly controlled entities. The Banking Group’s share of the contingent
liabilities of its joint ventures are incurred jointly with other investors. There were no contingent liabilities as at 30 September 2007 (30/09/2006$nil).

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES73

NOTES TO THE FINANCIAL STATEMENTS (continued)
48. PARENT COMPANY AND ULTIMATE PARENT COMPANY
The Parent Company is ANZ Holdings (New Zealand) Limited which is incorporated in New Zealand. The Ultimate Parent Company is Australia
and New Zealand Banking Group Limited which is incorporated in Australia.
The Ultimate Parent Company is required to hold minimum capital at least equal to that specified under the Basel framework. The capital adequacy
ratios are:
Australian IFRS
Australian IFRS
30/09/2007
30/09/2006
Tier 1 Capital
Total Capital

6.7%
10.1%

6.8%
10.6%

The Ultimate Parent Company meets those requirements imposed on it by its home supervisor as at 30 September 2007 whereby banks must
maintain a ratio of qualifying capital to risk weighted assets of at least 8 per cent.
The Australian Prudential Regulatory Authority (APRA) introduced new prudential capital standards as at 1 July 2006 which contain varioustransitional rules which run through to different dates in 2008 and 2010 to coincide with Basel II implementation.

49. SUBSEQUENT EVENTSThe financial statements were authorised for issue by the Directors on 5 November 2007.

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES74

NOTES TO THE FINANCIAL STATEMENTS (continued)
50. EMPLOYEE SHARE AND OPTION PLANS
The Banking Group participates in the ANZ Employee Share Acquisition Plan and the ANZ Share Option Plan operated by the ANZ. Any shares or
options granted under these plans are shares in Australia and New Zealand Banking Group Limited.
The closing market price of one ordinary share of ANZ quoted on the ASX (Australian Stock Exchange) at 30 September 2007 was A$29.70 (30/09/2006
A$26.86).
ANZ EMPLOYEE SHARE ACQUISITION PLAN
The ANZ Employee Share Acquisition Plan includes the A$1,000 Share Plan, the Deferred Share Plan and the Restricted Share Plan.
A$1,000 share plan
Each permanent employee who has had continuous service for one year with the Banking Group is eligible to participate in a scheme enabling theissue of up to A$1,000 of shares of ANZ in each financial year, subject to the approval of the Ultimate Parent Bank Board. The shares vest subject tosatisfaction of a three year service period but may be forfeited in the event of resignation or termination for serious misconduct. On expiration of that
period, an employee may sell the shares, transfer them into their name, or have them retained in trust. The issue price is based on the one-day volume
weighted average price (‘VWAP’) of the shares traded on the ASX on the date of issue.
The Banking Group’s employees are required to pay NZ 1 cent per share at the time the shares are transferred to them. During the year to 30 September
2007, 269,025 shares with an average issue price of A$27.88 were issued under the A$1,000 Share Plan (30/09/2006 308,919 shares with an average
issue price of A$23.67 were issued).
Deferred share plan
The Banking Group’s last issue of shares under this plan was in November 2004. Selected employees were issued deferred shares, which vest subject
to satisfaction of a minimum three year service period 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 to be traded after the restriction period has expired. The issue price is basedon the VWAP of the shares traded on the ASX in the five trading days 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.
During the year to 30 September 2007, no shares were issued under the deferred share plan (30/09/2006 no shares were issued).
Restricted share plan
Restricted Shares are available to selected employees and are issued under the ANZ Employee Share Acquisition Plan. Selected employees have theoption to take some (or all) of their incentive payment as Restricted Shares. The shares are held in trust and may not be traded until the conclusion of
the one-year restriction period, after which they may be transferred into the employees name. Until they are transferred into the employees name, they
continue to be subject to forfeiture on termination for serious misconduct.
Shares valuations
The fair value of services received in return for shares in the ANZ Employee Share Acquisition Plan are measured by referring to the fair value of ANZshares granted. The fair value of shares granted in the current year, measured at the date of grant of the shares, is NZ $9 million based on 269,025 sharesat a weighted average price of A$27.88 converted at the exchange rate of 0.8391 (30/09/2006: $8 million based on 308,919 shares at a weighted average
price of A$23.67 converted at the exchange rate of 0.9015 were issued).
The average issue price of shares granted and the number of shares that are expected to ultimately vest to the employees at the end of the vesting period
are used to calculate the fair value of shares. No dividends are incorporated into the measurement of the fair value of shares.
ANZ SHARE OPTION PLAN
Selected employees may be granted options, which entitle them to purchase ordinary fully paid shares in ANZ at a price fixed at the time when theoptions were issued. Voting and dividend rights will be attached to the unissued ordinary shares when the options have been exercised. Each option
entitles a holder to purchase one ordinary share subject to any terms and conditions imposed on issue. The exercise price of the options (excluding zeropriced options) is determined in accordance with the rules of the plan, and is based on the weighted average price of the Ultimate Parent Bank’s shares
traded during the five business days preceding the date of granting the options.
The main schemes of the ANZ Share Option Plan are as follows:
Current option plans
Performance rights planThis scheme is a long term incentive program available to certain Banking Group employees since November 2005 and grants the right to acquire ANZ
shares at nil cost, subject to a three year vesting period and a Total Shareholder Return (TSR) performance hurdle. The proportion of rights that will
become exercisable will depend upon the TSR achieved by ANZ relative to the companies in the comparator group, which consists of selected major
financial services companies in the Standard & Poor’s and ASX 100 Index. Performance equal to the median TSR of the comparator group will resultin half the rights becoming exercisable. Performance above the median will result in further performance rights becoming exercisable, increasing ona straight line basis until all of the rights become exercisable where ANZ’s TSR is at or above the 75th percentile in the comparator group. The TSR
hurdle will only be tested once at the end of the three-year vesting period. If the rights do not pass the hurdle on testing date, or if they pass the hurdle
on testing date and are not exercised by the end of five years from the grant date, the rights will lapse. In the case of resignation or termination on notice,
only rights that become exercisable by the end of the notice period may be exercised. A grace period is provided in which to exercise the rights. Allother rights will lapse. In the case of retrenchment or retirement, performance rights will be performance tested at the date of termination and where
performance hurdles have been met, performance rights will be pro-rated and a grace period provided in which to exercise the rights. In case of deathor total and permanent disablement, a grace period is provided in which to exercise all performance rights.
Deferred share rights
This scheme is a short term incentive program available to certain Banking Group employees since November 2004 and grants the right to acquire ANZ
shares at nil cost after a specified vesting period ranging from one to three years. Deferred share rights must be exercised by the seventh anniversary ofgrant date. In the case of resignation, only rights that become exercisable by the end of the notice period may be exercised. A grace period is provided
in which to exercise the rights. All other rights will lapse. In the case of termination on notice, retrenchment, retirement, death or total and permanent
disablement, a grace period is provided in which to exercise all performance rights.

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES75NOTES TO THE FINANCIAL STATEMENTS (continued)
50. EMPLOYEE SHARE AND OPTION PLANS (continued)
Legacy Option Plans
Performance options planThis scheme is a long term incentive program available to certain Banking Group employees. The options can only be exercised after a threeyear vesting period and before the seventh anniversary of the grant date. There are no other performance conditions attached to these options. All
unexercised options are generally forfeited on resignation but any options to which the Banking Group employee is entitled will need to be exercised
within a specified period of termination. On retrenchment, entitlements to options will be pro-rated over the three year vesting period. On deathor total and permanent disablement, all unvested options will become available for exercise. No further performance options have been granted to
Banking Group employees after November 2005.
Zero-price options (ZPO)A ZPO is a right to acquire an ANZ share at nil cost and is granted to certain employees as part of their employment contracts. The ZPOs have notime based vesting criteria, so can be exercised at any time during employment and within 6 months of termination of employment. ZPO’s must be
exercised within two years of grant date or they lapse.
Other past option plans which are no longer available to the Banking Group’s employees, but continue to be amortised during their appropriate
vesting periods are hurdled options and index linked options (ILOs).
Details of the options over unissued ANZ ordinary shares and their related weighted average exercise prices as at the beginning and end of the year
and movements during the year are set out below:
		Consolidated/Parent
30/09/2007
30/09/2006
Number Weighted average
Number Weighted averageof shares
exercise price1of shares
exercise price1
		
A$		
A$
Share options at beginning of the year
Share options granted
Share options exercised
Share options forfeited and expired

1,668,436	17.49
318,921	
–(339,782)	17.53(30,859)	19.67

1,590,402
439,415(248,243)(113,138)

18.20
14.75
17.07
18.65

Share options at end of the year

1,616,716	13.93

1,668,436

17.49

28.83		0.00 – 23.49		

25.25
0.00 – 23.49

46 months		

55 months

Weighted average share price during the year		
Range of exercise prices on share options at end of the year
Weighted average remaining contractual life on
share options at end of the year

Options valuations
The fair value of services received in return for share options are measured by referring to the fair value of ANZ share options granted. The fair valueof options granted in the current year, measured at the date of grant are calculated using one of the following models:(a) Monte-Carlo simulation model utilising the assumptions underlying Black-Scholes. In terms of factoring in early exercise, the model assumes
that deferred share rights and performance rights are exercised as soon as they vest so that the option holder can benefit from the dividends. It
assumes that the performance options are exercised when the share price reaches twice the exercise price; or(b) an adjusted form of the Binomial Option pricing model (“BOM”). In terms of factoring in early exercise, the model assumes that the expected
life of vanilla options is 5 years, performance rights is 4 years and that deferred share rights are exercised immediately to account for lack ofmarketability.
In addition, both models are designed such that they take into account as appropriate, any performance hurdles and non-transferability of theoptions
All options issued in 2007 were valued using the BOM pricing model.
The following inputs are used to measure the fair value of instruments granted during the period. For each instrument, the model used (a or b) is
indicated. All prices are quoted in Australian dollars:
Option type
LTI deferredSpecial deferred
STI deferred
LTI deferred
Performance
share rights (b)share rights (b) share rights (b) share rights (b)rights (b)Grant date
Number of Options
Option value
Exercise price (5 day VWAP)
Share price at grant
ANZ expected volatility2
Option term
Vesting period
Expected life
Expected dividends
Risk free interest rate

11/07/2007
25,057$25.94$nil$29.6015%
5 years
3 years
3 years
4.50%
6.37%

1/11/2006
4,060$27.54$nil$29.5415%
5 years
18 months
18 months
4.80%
6.11%

1/11/2006
69,234$26.89$nil$29.5415%
5 years
2 years
2 years
4.80%
6.11%

1/11/2006
28,516$25.66$nil$29.5415%
5 years
3 years
3 years
4.80%
6.02%

24/10/2006
192,054$13.08$nil$28.1515%
5 years
3 years
4 years
4.80%
6.00%

Calculation of weighted average exercise prices are affected by performance rights, deferred share rights and ZPO plans which have nil exercise
prices.
2
Expected volatility is based on ANZ’s historic volatility.
1

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES76

NOTES TO THE FINANCIAL STATEMENTS (continued)
51. RETIREMENT BENEFIT OBLIGATIONSThe Banking Group has established a number of pension and superannuation schemes. The Banking Group may be obliged to contribute to theschemes as a consequence of legislation and provision of trust deeds. Legal enforceability is dependent on the terms of the legislation and trust
deeds. The major schemes are:		
Contribution levels
SchemeScheme type
Employee
Employer
ANZ National Bank Staff Superannuation Scheme1

The National Bank Staff Superannuation Fund1

Defined Benefit Scheme2orDefined Contribution Scheme
Defined Benefit Scheme3orDefined Contribution Scheme

Nil

Balance of cost4

2.5% minimum of salary

7.5% of salary6

5% of salary

Balance of cost5

2.0% minimum of salary

11.2% of salary7

Details of the defined benefit schemes are as follows:
Actuarial valuations are undertaken every six months. The latest valuations were carried out as at 30 September 2007.
Consolidated/Parent
30/09/2007
30/09/2006$m$m
The amounts recognised in the balance sheet arising from the
Banking Group’s obligation in respect of its defined benefit schemes are
determined as follows:
Defined benefit obligation at beginning of the year
Current service cost
Interest cost
Contributions by scheme participants
Actuarial (gains) losses
Benefits paid

190
4
12
1	
(10)
(16)

187
4
11
1
7
(20)

Present value of funded defined benefit obligations

181	

190

Fair value of scheme assets at beginning of the year
Expected return on scheme assets (net of tax)
Actuarial (losses) gains
Contributions by employer
Contributions by scheme participants
Benefits paid

196
11	
(7)
4
1	
(16)

195
11
5
4
1
(20)

Fair value of scheme assets

189

196

8

6

Net defined benefit asset recognised on balance sheet

The fair value of scheme assets include cash deposits and fixed interest investments of $7 million with the Banking Group (30/09/2006 $9
million).
The amounts recognised in the income statement in respect of defined benefit schemes are as follows:
Current service cost
Interest cost
Expected return on scheme assets (net of tax)
Contribution withholding tax
Total pension costs recognised in the income statement – defined benefit superannuation schemes

4
12
(11)
1	

4
11
(11)
2

6

6

These schemes provide for pension benefits and provide for lump sum benefits.
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 todependents of the members.
3
Closed to new members on 1 October 1991.
4
2007: $nil (2006 $nil).
5
2007: 22.3% (2006 22.3%) of members’ salaries.
6
2007: 7.5% (30/09/2006: 7.5%) of members’ salaries.
7
2007: 11.2% (30/09/2006:11.2%) of members’ salaries.
1
2

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES77NOTES TO THE FINANCIAL STATEMENTS (continued)
51. RETIREMENT BENEFIT OBLIGATIONS (continued)
Consolidated/Parent
30/09/2007
30/09/2006
The actuarial gains and losses recognised directly in equity via the statement of recognised income andexpense are as follows:
Actuarial gains (pre-tax) at beginning of the year
Actuarial gain (loss) (pre-tax) incurred during the year

4
3

6
(2)

Balance of actuarial gains (pre-tax) at end of the year

7

4

Income tax expense recognised directly in equity

(2)

(1)

Balance of actuarial gains at end of the year

5

3

The National Bank
Staff Superannuation
Fund
30/09/2007 30/09/2006

ANZ National Bank
Staff Superannuation
Scheme30/09/2007 30/09/2006

The principal actuarial assumptions used were as follows:
Defined benefits calculation
Discount rate (gross of tax)
Future price inflation
Future pension increases
Future salary increases

6.5%
2.5%
2.5%
3.7%

6.0%
2.5%
2.5%
3.7%

6.5%
2.5%
2.5%
n/a

6.0%
2.5%
2.5%
n/a

Scheme assets calculation
Expected return on scheme assets (net of tax)

5.5%

5.5%

4.5%

4.5%

The overall expected return on scheme assets is determined by reference to market expectations, at beginning of the relevant period, of asset
performance applicable to the period over which the defined benefit obligation is to be settled. The overall expected return on scheme assets reflects
an aggregation of the expected returns on the underlying asset classes.
The actual return on scheme assets (net of tax) for The National Bank Staff Superannuation Fund was 6.5% for the year ended 30 September 2007
(30/09/2006 9.1%). The actual return on scheme assets (net of tax) for the ANZ National Bank Staff Superannuation Scheme was 6.1% for the year
ended 30 September 2007 (30/09/2006 7.6%).
The investment return on scheme assets is taxed at 33% (30/09/2006 33%).
The National Bank
Staff Superannuation
Fund
30/09/2007 30/09/2006

ANZ National Bank
Staff Superannuation
Scheme30/09/2007 30/09/2006

The major categories of scheme assets as a percentage of the fair valueof scheme plan assets are as follows:
Cash and short term debt instruments
New Zealand fixed interest
Overseas fixed interest
New Zealand equities
Overseas equities
Property

15.7%
22.2%
16.5%
8.9%
36.7%
0.0%

15.0%
22.0%
17.0%
11.0%
35.0%
0.0%

13.2%
23.1%
23.3%
7.1%
28.0%
5.3%

12.0%
26.0%
24.0%
9.0%
24.0%
5.0%

100.0%

100.0%

100.0%

100.0%The benchmark weightings of each asset class is determined by the Trustee in conjunction with the investment manager.

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES78

NOTES TO THE FINANCIAL STATEMENTS (continued)
51. RETIREMENT BENEFIT OBLIGATIONS (continued)
Historical summary
Actuarial gains and losses comprise experience adjustments (the effects of differences between the previous actuarial assumptions and what has
actually occurred in the period) and the effects of changes in actuarial assumptions on valuation date. The history of the schemes’ net position andexperience adjustments is as follows:
Consolidated/Parent
30/09/2007
30/09/2006
30/09/2005$m$m$m
Defined benefit obligation
(181)
(190)
(187)
Fair value of scheme assets
189
196
195
Net benefit asset

8

6

8

Experience adjustments on scheme liabilities
Experience adjustment on scheme assets

(1)
(7)

3
5

–
11

Employer contributions
To ensure the defined benefit schemes remain solvent, the schemes’ independent actuaries recommend an employer contribution rate to the Banking
Group, annually for The National Bank Staff Superannuation Fund and every three years for the ANZ National Bank Staff Superannuation Scheme.
The funding methods and current contribution rates of the individual schemes are determined in accordance with FRS-32 Financial Reporting by
Superannuation Schemes (‘FRS-32’) and differ to the actuarial valuations undertaken for NZ IFRS purposes.
The National Bank Staff Superannuation Fund deficit was valued at $5.5 million in the most recent actuarial valuation at 1 April 2007 determined inaccordance with FRS-32. The most recent actuarial valuation determined in accordance with FRS-32 for the ANZ National Bank Staff Superannuation
Scheme was undertaken at 31 December 2004 and valued the scheme at a $0.2 million surplus.
The Banking Group expects to contribute $4 million (net of contributions withholding tax) to its defined benefit schemes in the year to 30 September
2008. Employer contributions are taxed at a rate of 33% (30/09/2006 33%).
Contingent liabilities
The National Bank Staff Superannuation Fund
The Banking Group has no present liability under the Fund’s Trust Deed to fund the deficit, but it does have a contingent liability if the Fund waswound up. Under the Fund’s Trust Deed, if this scheme were wound up, the Banking Group is required to pay the Trustee of the Fund an amountsufficient to ensure members do not suffer a reduction in benefits to which they would otherwise be entitled.
ANZ National Bank Staff Superannuation Scheme
If the Scheme is wound up then its assets must be cashed up and applied to all members’ benefits. If Scheme funds are insufficient to pay all members’
benefits then the Banking Group must pay to the Scheme such amounts as the Scheme Actuary determines are necessary to pay those benefits.

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES79

DIRECTORATE AND AUDITORS
Directorate and Auditors
The address to which any document or communication may be sent to any
Director is ANZ National Bank Limited, Level 14, 215–229 Lambton Quay,
PO Box 1492, Wellington, New Zealand. The document or communication
should be marked for the attention of that Director.

The Companies Act 1993 (subject to any different provision in the Bank’sConstitution) allows a Director with an interest in a transaction to participate
in discussions and to vote on all matters relating to that particular transaction.
The Bank’s Constitution does not alter that situation. However, the Board
has adopted a guideline whereby a Director with an interest in a transaction
should not be present during any discussions, and should not vote, on any
matter pertaining to that particular transaction.

Directors’ Interests
Transactions with Directors
In order to ensure that members of the Board are reminded of their disclosure
obligations under the Companies Act 1993, the following procedures are
adopted:a) At least once in each year, Directors are requested to complete, in termsof section 140(1) of the Companies Act 1993, a disclosure of any interests
which they have with the Bank itself. Directors are reminded at this timeof their obligation under the Companies Act 1993 to disclose promptly
any transaction or proposed transaction with the Bank in which they
have an interest.
b) Directors are also requested to make a general disclosure of their interest
in other entities in terms of section 140(2) of the Companies Act 1993.
In addition, they are requested to initiate a review of that disclosure if
there are any significant alterations which occur subsequently during
the year.

No Director has disclosed that he or any immediate relative or professional
associate has any dealing with the Banking Group which has been either
entered into on terms other than those which would in the ordinary courseof business be given to any other person of like circumstances or meansor which could otherwise be reasonably likely to influence materially theexercise of the Director’s duties as a Director of the Bank.
Changes to Directorships
There has been the following change in the Bank’s Board of Directors since
the authorisation date of the previous Disclosure Statement on 9 August
2007.
Mr M R P Smith was appointed a director of the Bank on 1 October 2007,
replacing Mr J McFarlane who resigned from the Board on 30 September
2007.

In addition to the written disclosures referred to in paragraphs (a) and (b)above, Directors disclose relevant interests which they have before discussionof particular business items.
Board Members as at 5 November 2007
Independent Non-Executive Director, Chairman
Sir Dryden Spring
DSc
Company Director
Matamata, New Zealand
Directorships
Director: Sky City Entertainment Group Limited, Port of Tauranga Limited,
Fletcher Building Limited, Fletcher Building Finance Limited, Northport
Limited
Executive Director
Graham Kennedy Hodges
BEc (Hons)
Chief Executive
ANZ National Bank Limited
Wellington, New Zealand
Directorships
Director: ANZ Holdings (New Zealand) Limited, Banking Ombudsman
Scheme Limited
Non-Executive Directors
Dr Bob Edgar
Ph.D, BEc (Hons)
Senior Managing Director
Australia and New Zealand Banking Group Limited
Melbourne, Australia

Michael Roger Pearson Smith, OBE
BSc (Hons)
Chief Executive Officer
Australia and New Zealand Banking Group Limited
Melbourne, Australia

Directorships
Chairman: Esanda Finance Corporation Limited, ING Australia Limited
Director: ANZ Insage Pty Limited, ANZ Royal Bank (Cambodia) Limited,
ANZ Specialist Asset Management Limited, Tianjin City Commercial Bank,AMMB Holdings Berhad, ANZ Business Equity Fund Limited (Alternate
Director)

Directorships
Director: Australia and New Zealand Banking Group Limited

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES80

DIRECTORATE AND AUDITORS (continued)
Peter Ralph Marriott
BEc (Hons), FCA
Chief Financial Officer
Australia and New Zealand Banking Group Limited
Melbourne, Australia
Directorships
Director: ANZ Capital Hedging Pty Limited, ANZ (Delaware) Inc., ANZ
Holdings (New Zealand) Limited, Deori Pty Limited, Esanda FinanceCorporation Limited, ANZEST Pty Limited, ANZ Funds Pty Limited, GNPL
Pty Limited, ANZ Investment Holdings Pty Limited, ANZ Investments Pty
Limited, LFD Limited, ANZ Orchard Investments Pty Limited, RFDL Pty
Limited, Ballimore Pty Limited
Independent Non-Executive Directors
Norman Michael Thomas Geary, CBE
B Com, FACA, FNZIM, FCIT
Company Director
Auckland, New Zealand

Dr Donald Thomas Brash
MA EconCompany Director
Auckland, New Zealand

Directorships
Chairman: Gough Holdings Limited, Gough Gough & Hamer Investments
Limited, Gough Gough & Hamer Limited, Gough Gough & Hamer Properties
Limited, Gough Finance Limited, Gough Transport Supplies Limited,
Transport Specialities Limited, Transport Wholesale Limited, Heavy Duty
Transport Equipment Pty Limited, Reyco Australia Pty Limited, Australian
Tipping Systems Pty Limited
Director: Fisher & Paykel Appliances Holdings Limited, Otago Innovation
Limited, DB Breweries Limited

Directorships
Director: Brash Forestry Limited, Eljeans Orchard Limited, Brash Family
Trust Nominees Limited, Huljich Limited, Huljich (New Zealand) Limited,
Huljich Wealth Management (New Zealand) Limited, Brash Consultancy
Services Limited

Audit Committee Members as at 5 November 2007
N M T Geary (Chairman)
Sir Dryden Spring
P R Marriott
Dr D T Brash

Independent Non-Executive Director
Independent Non-Executive Director
Non-Executive Director
Independent Non-Executive Director

The Audit Committee, which is a sub-committee of the Board, has responsibility for reviewing all aspects of published financial statements. The Audit
Committee Charter provides that the membership of the Audit Committee shall be not less than three non-executive Directors. The quorum shall be not lessthan two non-executive Director members.
Responsible Persons
Sir Dryden Spring has been authorised in writing in accordance with section 82 of the Reserve Bank Act of New Zealand 1989 to sign this General DisclosureStatement on behalf of the following Directors of the Bank, as a responsible person under the Order: Dr R J Edgar, N M T Geary, CBE, M R P Smith, OBE,
Dr D T Brash and P R Marriott.
Auditors
KPMG
Chartered Accountants
10 Customhouse Quay
P O Box 996
Wellington, New ZealandANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES81

CONDITIONS OF REGISTRATION
Conditions of Registration, applicable as at 5 November 2007. These
Conditions of Registration have applied from 30 June 2007.
The registration of ANZ National Bank Limited (‘the Bank’) as a registeredbank is subject to the following conditions:
1. That the Banking Group complies with the following requirements at all
times:–––

Capital of the Banking Group is not less than 8 percent of risk
weighted exposures.
Tier one capital of the Banking Group is not less than 4 percent ofrisk weighted exposures.
Capital of the Banking Group is not less than NZ $15 million.

That the Bank complies with the following requirements at all times:–––

Capital of the Bank is not less than 8 percent of risk weighted
exposures.
Tier one capital of the Bank is not less than 4 percent of risk weighted
exposures.
Capital of the Bank is not less than NZ $15 million.

For the purposes of this condition of registration, capital, tier one capitaland risk weighted exposures shall be calculated in accordance with theReserve Bank of New Zealand document entitled ‘Capital Adequacy
Framework’ (BS2) dated March 2007.
In its disclosure statements under the Registered Bank DisclosureStatement (Off-Quarter – New Zealand Incorporated Registered Banks)
Order 2007, the Bank must include all of the information relating to thecapital position of both the Bank and the Banking Group which would
be required if the second schedule of that Order was replaced by thesecond schedule of the Registered Bank Disclosure Statement (Full andHalf-Year – New Zealand Incorporated Registered Banks) Order 2007
in respect of the relevant quarter.
2. That the Banking Group does not conduct any non-financial activities
that in aggregate are material relative to its total activities, where theterm material is based on generally accepted accounting practice, as
defined in the Financial Reporting Act 1993.
3. That the Banking Group’s insurance business is not greater than 1% of
its total consolidated assets. For the purposes of this condition:(i) Insurance business means any business of the nature referred to in
section 4 of the Insurance Companies (Ratings and Inspections) Act
1994 (including those to which the Act is disapplied by sections
4(1)(a) and (b) and 9 of that Act), or any business of the naturereferred to in section 3(1) of the Life Insurance Act 1908;(ii) In measuring the size of the Banking Group’s insurance business:(a) Where insurance business is conducted by any entity whosebusiness predominantly consists of insurance business, the sizeof that insurance business shall be:• The total consolidated assets of the group headed by that
entity;• Or if the entity is a subsidiary of another entity whosebusiness predominantly consists of insurance business, thetotal consolidated assets of the group headed by the latterentity;(b) Otherwise, the size of each insurance business conducted by any
entity within the Banking Group shall equal the total liabilities
relating to that insurance business, plus the equity retained by
the entity to meet the solvency or financial soundness needs ofthe insurance business;(c) The amounts measured in relation to parts a) and b) shall besummed and compared to the total consolidated assets of the
Banking Group. All amounts in parts a) and b) shall relate to on
balance sheet items only, and shall be determined in accordancewith generally accepted accounting practice, as defined in the
Financial Reporting Act 1993;(d) Where products or assets of which an insurance business iscomprised also contain a non-insurance component, the wholeof such products or assets shall be considered part of theinsurance business.
4. That aggregate credit exposures (of a non-capital nature and net of
specific provisions) of the Banking Group to all connected persons do
not exceed the rating-contingent limit outlined in the following matrix:
Credit Rating

AA/Aa2 and above
AA-/Aa3
A+/A1
A/A2
A-/A3
BBB+/Baa1 and below

Connected exposure limit (%of the Banking Group’s Tier
1 capital)
75
70
60
40
30
15

Within the rating-contingent limit, credit exposures (of a non-capitalnature and net of specific provisions) to non-bank connected persons
shall not exceed 15 percent of the Banking Group’s tier one capital.
For the purposes of this condition of registration, compliance with therating-contingent connected exposure limit is determined in accordancewith the Reserve Bank of New Zealand document entitled ‘Connected
Exposure Policy’ (BS8) dated March 2007.
5. That exposures to connected persons are not on more favourable terms(e.g. as relates to such matters as credit assessment, tenor, interest
rates, amortisation schedules and requirement for collateral) thancorresponding exposures to non-connected persons.
6. That the board of the Bank contains at least two independent directors
and that alternates for those directors, if any, are also independent. In thiscontext an independent director (or alternate) is a director (or alternate)
who is not an employee of the Bank, and who is not a director, trustee,or employee of any holding company (as that term is defined in section
5 of the Companies Act 1993) of the Bank, or any other entity capableof controlling or significantly influencing the Bank.
7. That the chairperson of the Bank’s board is not an employee of theBank.
8. That the Bank’s constitution does not include any provision permitting
a director, when exercising powers or performing duties as a director,
to act other than in what he or she believes is the best interests of thecompany (i.e. the Bank).
9. That a substantial proportion of the Bank’s business is conducted in andfrom New Zealand.
10. That no appointment of any director, chief executive officer, or executive
who reports or is accountable directly to the chief executive officer, shallbe made in respect of the Bank unless:(i) The Reserve Bank has been supplied with a copy of the curriculum
vitae of the proposed appointee, and(ii) The Reserve Bank has advised that it has no objection to thatappointment.

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES82

CONDITIONS OF REGISTRATION (continued)
11. That by 31 December 2007 the Bank will have legal and practical ability
to control and execute any business, and any functions relating to any
business, of the Bank that are carried on by a person other than the Bank,sufficient to achieve, under normal business conditions and in the eventof stress or failure of the Bank or of a service provider to the Bank, thefollowing outcomes:(a) that the Bank’s clearing and settlement obligations due on a day canbe met on that day;(b) that the Bank’s financial risk positions on a day can be identified onthat day;(c) that the Bank’s financial risk positions can be monitored andmanaged on the day following any failure and on subsequent days;and(d) that the Bank’s existing customers can be given access to payments
facilities on the day following any failure and on subsequent days.
For the purposes of this condition of registration, the term “legal andpractical ability to control and execute” is explained in the Reserve Bankof New Zealand document entitled ‘Outsourcing Policy’ (BS11) dated
January 2006.

12. (a) That the business and affairs of the Bank are managed by, or under
the direction and supervision of, the board of the Bank.
(b) That the employment contract of the chief executive officer of the
Bank or person in an equivalent position (together “CEO”) is with
the Bank, and the terms and conditions of the CEO’s employment
agreement are determined by, and any decision relating to theemployment or termination of employment of the CEO are madeby, the board of the Bank.
(c) That all staff employed by the Bank shall have their remuneration
determined by (or under the delegated authority of) the board or the
CEO of the Bank and be accountable (directly or indirectly) to the
CEO of the Bank.
For the purposes of these conditions of registration, the term ‘Banking
Group’ means ANZ National Bank Limited’s financial reporting group(as defined in section 2(1) of the Financial Reporting Act 1993).

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES83

CREDIT RATING INFORMATIONThe Bank has two current credit ratings, which are applicable to its long-term senior unsecured obligations which are payable in New Zealand in New
Zealand dollars. The credit ratings are:Standard & Poor’s

AA

Moody’s Investors Service

Aa2

The Standard & Poor’s rating was issued on 22 February 2007. On this date Standard & Poor’s revised the Bank’s rating to AA from AA-. There have been
no other changes in the credit rating issued in the past two years ended 30 September 2007. The rating is not subject to any qualifications.
The Moody’s Investors Service was issued on 4 May 2007. On this date Moody’s Investors Service revised the Bank’s rating to Aa2 from Aa3. There havebeen no other changes in the credit rating issued in the past two years ended 30 September 2007. The rating is not subject to any qualifications.
The following is a description of the major ratings categories by Ratings Agency:
Standard & Poor’s – Credit rating scale for long-term ratings:

Ratings scale

Description

AAA

Extremely strong capacity to pay interest and repay principal in a timely manner. Highest rating
assigned.

AA

Very strong capacity to pay interest and repay principal in a timely manner. This differs from the highest
rating only in a small degree.

A

Strong capacity to pay interest and repay principal in a timely manner, but may be more susceptible tothe adverse effects of changes in circumstances and economic conditions than higher rated entities.

BBB

Adequate capacity to pay interest and repay principal in a timely manner, however adverse economic
conditions or changing circumstances are more likely to lead to a weakened capacity to meet debt
servicing commitments than higher rated entities.

BB

A degree of speculation exists with respect to the ability of an entity with this credit rating to pay
interest and repay principal in a timely manner. Adverse business, financial, or economic conditions
could impair the borrower’s capacity to meet debt service commitments in a timely manner.

B

Entities rated B are more vulnerable to adverse business, financial or economic conditions than entities
in higher rating categories. Adverse business, financial or economic conditions will likely impair the
borrower’s capacity or willingness to meet debt service commitments in a timely manner.

CCC

Entities rated CCC are currently vulnerable to default and are dependent on favourable business,financial and economic conditions to meet debt service commitments in a timely manner. In the eventof adverse business, financial or economic conditions the entity is likely to default.

CC

Entities rated CC are currently highly vulnerable to non-payment of interest and principal.

C

Entities rated C have filed a bankruptcy petition or taken similar action, but payment of obligations arebeing continued.

D

D rated entities are in default. This is assigned when interest or principal payments are not made on thedate due or when an insolvency petition or a request to appoint a receiver is filed.

Plus (+) or Minus (-): The ratings from ‘AA’ to ‘CCC’ may be modified by the addition of a plus or minus sign to show relative standing within the major
rating categories.

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES84

CREDIT RATING INFORMATION (continued)
Moody’s Investors Service – Credit rating scale for long-term ratings:

Ratings scale

Description

Aaa

Judged to be of the best quality. They carry the smallest degree of investment risk and are generally
referred to as ‘gilt edged’. Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely to change, such changes
as can be visualised are most unlikely to impair the fundamentally strong position of such issues.

Aa

Judged to be of high quality by all standards. Together with the Aaa group they comprise what are
generally known as high-grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of protective elements may beof greater amplitude or there may be other elements present which make the long-term risk appear
somewhat larger than the Aaa securities.

A

Possess many favourable investment attributes and are to be considered as upper-medium-grade
obligations. Factors giving security to principal and interest are considered adequate, but elements may
be present which suggest a susceptibility to impairment some time in the future.

Baa

Considered as medium-grade obligations (i.e. they are neither highly protected nor poorly secured).
Interest payments and principal security appear adequate for the present but certain protective elements
may be lacking or may be characteristically unreliable over any great length of time. Such bonds lackoutstanding investment characteristics and in fact have speculative characteristics as well.

Ba

Judged to have speculative elements; their future cannot be considered as well-assured. Often theprotection of interest and principal payments may be very moderate, and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position characterises bonds in thisclass.

B

Generally lack characteristics of the desirable investment. Assurance of interest and principal payments
or of maintenance of other terms of the contract over any long period of time may be small.

Caa

These bonds are of poor standing. Such issues may be in default or there may be present elements ofdanger with respect to principal or interest.

Ca

Represent obligations which are speculative in a high degree. Such issues are often in default or haveother marked shortcomings.

C

These are the lowest rated class of bonds, and issues so rated can be regarded as having extremely poor
prospects of ever attaining any real investment standing.

Moody’s Investors Service bond ratings, where specified, are applied to financial contracts, senior bank obligations and insurance company senior policyholder
and claims obligations with an original maturity in excess of one year.
Moody’s Investors Service applies numerical modifiers 1, 2 and 3 in each generic rating classification from ‘Aa’ through ‘Caa’. The modifier 1 indicates thatthe obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in
the lower end of that generic rating category.

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES85

DIRECTORS’ STATEMENT for the year ended 30 September 2007
Directors’ Statement
As at the date on which this Disclosure Statement is signed, after due enquiry, each Director believes that:i.

The Disclosure Statement contains all the information that is required by the Registered Bank Disclosure Statement (Full and Half-Year – New Zealand
Incorporated Registered Banks) Order 2007;

ii. The Disclosure Statement is not false or misleading.
Over the year ended 30 September 2007, after due enquiry, each Director believes that:i.

ANZ National Bank Limited has complied with the Conditions of Registration;

ii. Credit exposures to connected persons were not contrary to the interests of the Banking Group;iii. ANZ National Bank Limited had systems in place to monitor and control adequately the Banking Group’s material risks, including credit risk,
concentration of credit risk, interest rate risk, currency risk, equity risk, liquidity risk and other business risks, and that those systems were being properly
applied.
This General Disclosure Statement is dated, and has been signed by or on behalf of all Directors of the Bank on, 5 November 2007. On that date,
the Directors of the Bank were:
Dr D T Brash
Dr R J Edgar
N M T Geary, CBE
G K Hodges
P R Marriott
M R P Smith, OBE
Sir Dryden Spring

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES86

AUDIT REPORT for the year ended 30 September 2007

Audit Report to the shareholder of ANZ National Bank Limited
We have audited the financial statements, including supplementary information, on pages 4 to 78. The financial statements and supplementary information
provide information about the past financial performance and financial position of ANZ National Bank Limited (the ‘Registered Bank’) and its subsidiaries(the ‘Banking Group’) as at 30 September 2007. The supplementary information is disclosed in accordance with clauses 12(3), 12(4) and 14A of theRegistered Bank Disclosure Statement (Full and Half-Year – New Zealand Incorporated Registered Banks) Order 2007 (the ‘Order’). This information isstated in accordance with the accounting policies set out on pages 8 to 15.
Directors’ responsibilities
The Directors are responsible for the preparation of financial statements in accordance with clause 12(1) of the Order, which give a true and fair view of thebalance sheets of the Registered Bank and Banking Group as at 30 September 2007 and the results of their operations and cash flows for the year ended onthat date.
They are also responsible for the preparation of supplementary information which:•gives a true and fair view, in accordance with clause 12(3) of the Order, of the matters to which it relates; and•complies with Schedules 7 and 8, in accordance with clause 12(4) of the Order.

Auditors’ responsibilities
It is our responsibility to express an independent opinion on the financial statements and supplementary information presented by the Directors and report
our opinion to you in accordance with clause 15(1) of the Order.
Basis of opinion
An audit includes examining, on a test basis, evidence relevant to the amounts and disclosures in the financial statements and supplementary information. It
also includes assessing:•

the significant estimates and judgments made by the Directors in the preparation of the financial statements and supplementary information; and•whether the accounting policies are appropriate to the Registered Bank’s and Banking Group’s circumstances, consistently applied and adequately
disclosed.

We conducted our audit in accordance with New Zealand Auditing Standards. We planned and performed our audit so as to obtain all the information andexplanations which we considered necessary in order to provide us with sufficient evidence to obtain reasonable assurance that the financial statements arefree from material misstatements, whether caused by fraud or error. In forming our opinion we also evaluated the overall adequacy of the presentation of
information in the financial statements.
Our firm has also provided other services to the Registered Bank and Banking Group in relation to other audit related services. Partners and employees ofour firm may also deal with the Registered Bank and Banking Group on normal terms within the ordinary course of trading activities of the business of theRegistered Bank and Banking Group. There are, however, certain restrictions on borrowings which the partners and employees of our firm can have with theRegistered Bank and Banking Group. These matters have not impaired our independence as auditors of the Registered Bank and Banking Group. The firm
has no other relationship with, or interest in, the Registered Bank and Banking Group.

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES87

AUDIT REPORT for the year ended 30 September 2007 (continued)
Unqualified opinion
We have obtained all the information and explanations we have required.
In our opinion:• proper accounting records have been kept by the Registered Bank and Banking Group as far as appears from our examination of those records;••

the financial statements on pages 4 to 78:–

comply with New Zealand generally accepted accounting practice; and–give a true and fair view of the balance sheets of the Registered Bank and Banking Group as at 30 September 2007 and the results of their operations
and cash flows for the year ended on that date;the supplementary information disclosed in accordance with clause 12(3) of the Order:
–
–
–

•

has been prepared in accordance with the guidelines issued pursuant to section 78(3) of the Reserve Bank Act 1989 and any Conditions of Registration;andis in accordance with the books and records of the Registered Bank and Banking Group; andgives a true and fair view of the matters to which it relates;

the supplementary information disclosed in accordance with clause 12(4) of the Order complies with Schedules 7 and 8 of the Order.

Our audit was completed on 5 November 2007 and our unqualified opinion is expressed as at that date.

Wellington

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES88

GENERAL DISCLOSURE STATEMENT for the year ended 30 September 2007
Index
General Disclosures2

27 Related Party Funding

42

Summary of Financial Statements

3

28 Loan Capital

42

Income Statements

429 Ordinary Share Capital

43

Statements of Recognised Income and Expenses

530 Reserves and Retained Profits

43

Balance Sheets

6

31 Capital Adequacy

Cash Flow Statements

7

32 Financial Risk Management

1

Accounting Policies

8 – 152

Critical Estimates and Judgements Used in
Applying Accounting Policies

16 – 173

Risk Management Policies

18 – 20

4

Income21

5

Expenses

22

6

Income Tax Expense23

7

Liquid Assets

24

8

Due from Other Financial Institutions

24

9

Trading Securities

24

10 Discontinued Operations

25 – 26

11 Derivative Financial Instruments

27 – 29

12 Available-For-Sale Assets

30

13 Net Loans and Advances

30

44 – 48
49

33 Fair Value of Financial Assets and Liabilities

50 – 51

34 Maturity Analysis of Assets and Liabilities

52 – 53

35 Interest Sensitivity Gap and Weighted Average
Interest Rates
36 Concentrations of Credit Risk

54 – 57
58 – 60

37 Foreign Currency Risk

60

38 Concentrations of Funding

61

39 Market Risk

61

40 Securitisation, Funds Management, Other Fiduciary
Activities and the Marketing and Distribution of
Insurance Products

62

41 Contingent Liabilities and Credit Related Commitments

63 – 64

42 Commitments

65

43 Interest Earning and Discount Bearing Assets and Liabilities

65

44 Segmental Analysis

66 – 67

14 Impaired Assets, Past Due Assets and Other Assets Under
Administration

31

45 Notes to the Cash Flow Statements

68

15 Provision for Credit Impairment

32

46 Related Party Transactions

69

16 Shares in Controlled Entities, Associates andJointly Controlled Entities

33

17 Other Assets

33

18 Deferred Tax Assets

34

19 Premises and Equipment

35 – 36

20 Goodwill and Other Intangible Assets

37

21 Due to Other Financial Institutions

38

22 Deposits and Other Borrowings

38

23 Payables and Other Liabilities

39

24 Deferred Tax Liabilities

39

25 Provisions

40

26 Bonds and Notes

41

47 Controlled Entities, Associates and Interests in Jointly
Controlled Entities

70 – 72

48 Parent Company and Ultimate Parent Company

73

49 Subsequent Events

73

50 Employee Share and Option Plans

74 – 75

51 Retirement Benefit Obligations

76 – 78

Directorate and Auditors

79 – 80

Conditions of Registration81 – 82

Credit Rating Information

83 – 84

Directors’ Statement
Audit Report85
86 – 87

A N Z N AT I O N A L B A N K L I M I T E D G R O U P     G e n e r a l D i s c l o s u r e S t a t e m e n t     3 0 S e p t e m b e r 2 0 0 7     N u m b e r 4 7

A N Z N AT I O N A L B A N K L I M I T E D G R O U P

General Disclosure Statement
for the year ended 30 September 2007

Number 47 Issued November 2007

ANZ National Bank Limited