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 1 M a r c h 2 0 0 7     N u m b e r 4 5

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 six months ended 31 March 2007

Number 45 Issued May 2007

ANZ National Bank Limited

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIESGENERAL DISCLOSURE STATEMENT for the six months ended 31 March 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

8–85

Directorate and Auditors

86–87

Conditions of Registration

88–89

Credit Rating Information

90–91

Directors’ Statement

92

Independent Review Report

93

Index

94

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(‘the Bank’) 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 period were retail,corporate and rural banking, mortgage lending, hire purchase and general
finance, international and investment banking, nominee and custodian
services, and life insurance and funds management activities through the
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
Unaudited
6 months to
31/03/2007$mConsolidated		Previous
NZ IFRS1, 2 NZ IFRS1, 2
GAAP3
Audited
Audited
AuditedYear toYear toYear to30/09/2006 30/09/2005 30/09/2004
$m
$m
$m

Previous
GAAP
AuditedYear to30/09/2003$mPrevious
GAAP
AuditedYear to30/09/2002
$m

3,923
2,816

7,206
5,077

6,009
4,069

4,481
2,797

1,980
1,220

1,829
1,112

Net interest income
Other operating income

1,107
422

2,129
802

1,940
794

1,684
751

760
453

717
500

Net operating income
Operating expenses

1,529
653

2,931
1,323

2,734
1,312

2,435
1,265

1,213
559

1,217
545

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

876
22
8

1,608
(10)
28

1,422
121
–

1,170
133
–

654
61
–

672
65
–

Provision for credit impairment

30

18

121

133

61

65

Profit before income tax
Income tax expense

846
287

1,590
523

1,301
398

1,037
357

593
176

607
177

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

559

1,067

903

680

417

430

76

5

14

–

–

–

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

635
2,235
–
–

1,072
2,003
–
61

917
1,438
4
–

680
958
–
–

417
841
–
–

430
786
–
–

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

2,870
6

3,136
(1)

2,359
4

1,638
–

1,258
–

1,216
–

–

(900)

(360)

(200)

(300)

(375)

Retained profits at end of the period

2,876

2,235

2,003

1,438

958

841

Consolidated		Previous
NZ IFRSNZ IFRS1, 2
GAAP3
Audited
Audited
AuditedYear toYear toYear to30/09/2006 30/09/2005 30/09/2004
$m
$m
$m

Previous
GAAP
AuditedYear to30/09/2003$mPrevious
GAAP
AuditedYear to30/09/2002$m

25
29,362
27,9981,364

43
27,353
26,106
1,247

NZ IFRS
Unaudited
6 months to
31/03/2007$m
Total impaired assets (on-balance sheet and off-balance sheet)
Total assets
Total liabilities
Equity124
100,958
92,066
8,892

1, 2

159
96,02487,7918,233

220
85,501
77,555
7,946

123
74,212
66,831
7,381

On 1 October 2005, the Banking Group adopted New Zealand equivalents to International Financial Reporting Standards (‘NZ IFRS’). In accordancewith NZ IFRS, the 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 to restate 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.
2Truck Leasing Limited has been classified as a discontinued operation for the 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.
1

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES	INCOME STATEMENTS for the six months ended 31 March 2007

Note

Consolidated
Unaudited
Unaudited
Audited
6 months to 6 months toYear to31/03/2007 31/03/2006 30/09/2006
$m
$m
$m

ParentUnaudited
Unaudited
6 months to 6 months to
31/03/2007 31/03/2006$m$m

AuditedYear to30/09/2006$mContinuing operations
Interest income

4

3,923

3,455

7,206

3,777

3,287

6,892

Interest expense

5

2,816

2,437

5,077

2,995

2,610

5,589

Net interest income

	1,107

1,018

2,129

782

677

1,303

Other operating income

4

411	

426

780

485

402

885

Share of profit of equity accounted
associates and jointly controlled entities16	11	

12

22

11	

12

22

Net operating income

	1,529

1,456

2,931

1,278

1,091

2,210

Operating expenses

5

653

683

1,323

629

657

1,273

876

773

1,608

649

434

937

30

13

18

29

12

16

846

760

1,590

620

422

921

287

242

523

195

135

310

559

518

1,067

425

287

611

76

2

5

–

–

–

635

520

1,072

425

287

611

Profit before provision for credit
impairment and income tax
Provision for credit impairment

15

Profit before income tax
Income tax expense

6

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

10

The notes on pages 8 to 85 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 six months ended 31 March 2007

Note
Available-for-sale revaluation reserve:
Valuation gain taken to equity
Cumulative gain transferred to the   income statement on sale

Consolidated
Unaudited
Unaudited
Audited
6 months to 6 months toYear to31/03/2007 31/03/2006 30/09/2006
$m
$m
$m

ParentUnaudited
Unaudited
6 months to 6 months to
31/03/2007 31/03/2006$m$m

AuditedYear to30/09/2006
$m

30

–

–

3

–

–

3

30

(3)

–

–

(3)

–

–

30

31	

(60)

18

31	

(60)

18

30, 51	

9

(2)

(2)

9

(2)

(2)

(13)

21

(5)

(13)

21

(5)

Net income (expense) recognised
directly in equity		

24

(41)

14

24

(41)

14

Profit after income tax

635

520

1,072

425

287

611

Total recognised income and expenses
for the period		

659

479

1,086

449

246

625

Cash flow hedging reserve:
Valuation gain (loss) taken to equity
Actuarial gain (loss) on defined benefit
schemes
Income tax (expense) credit on items
recognised directly in equity

The notes on pages 8 to 85 form part of and should be read in conjunction with these financial statements.

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES	BALANCE SHEETS as at 31 March 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

Unaudited
31/03/2007$mConsolidated
Unaudited
Audited31/03/2006 30/09/2006$m$m

Unaudited
31/03/2007$m

ParentUnaudited
31/03/2006$m

Audited30/09/2006$m

7
5,741	
8
3,067
9	1,91710–
11	
3,041	
1245
13, 14, 15
82,258
–

1,997
7,110
1,652
–
3,648
556
74,176
–

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

5,740
2,580
1,916
–
3,066
35
78,570
1,543

1,997
6,510
1,652
–
3,648
546
70,462
1,577

2,698
5,111
1,596
–
2,019
349
74,4531,505

16	190
28
17
800
18
353
19
225
20
3,293

174
–
606
363
729
3,283

177
114
890
332
240
3,288

7,669
208
686
324
54
3,243

8,774
100
505
328
51
3,237

7,684
242
797
307
59
3,239

	100,958

94,29496,024

105,634

99,387100,059

21	
22

4,178
64,758–11	
3,168
23	1,413
10
–
–
24
262
25	14426	13,340
27
2,764
28
2,039

3,936
61,716
–
2,927
1,363
–
11
178
149
11,323
2,643
1,522

3,987
63,176
–
1,997
1,240
53
–
210
135
12,4682,720
1,805

1,741	
56,61830,185
3,165
1,132
–
–
256
127
509
2,764
2,039

2,357
51,067
29,347
2,916
1,143
–
–
143
144
935
2,643
1,522

2,828
53,59428,648
1,992
1,015
–
–
202
131
475
2,720
1,805

Total liabilities

92,06685,76887,791

98,536

92,217

93,410Net assets

8,892

8,526

8,233

7,098

7,170

6,649

5,943
73
2,876

5,943
–
2,583

5,943
55
2,235

5,943
73
1,082

5,943
–
1,227

5,943
55
651

8,892

8,526

8,233

7,098

7,170

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
Current tax liabilities
Deferred tax liabilities
Provisions
Bonds and notes
Related party funding
Loan capital

EquityOrdinary share capital
Reserves
Retained profits
Total equity

29
30
30

The notes on pages 8 to 85 form part of and should be read in conjunction with these financial statements.

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES	CASH FLOW STATEMENTS for the six months ended 31 March 2007

Note
Cash flows from operating activities
Interest received
Dividends received
Fees and other income received
Interest paid
Operating expenses paid
Income taxes paid

Consolidated
Unaudited
Unaudited
Audited
6 months to 6 months toYear to31/03/2007 31/03/2006 30/09/2006
$m
$m
$m

3,717
	1	
437
(2,587)
(664)
(176)

ParentUnaudited
Unaudited
6 months to 6 months to
31/03/2007 31/03/2006$m$m

AuditedYear to30/09/2006
$m

3,174
–
515
(2,221)
(657)
(116)

6,707
1
953
(4,669)(1,276)(466)

3,581	
101	
398
(2,762)
(650)
(137)

3,048
–
425
(2,423)
(635)
(22)

6,445
153
774
(5,229)(1,230)(285)

Cash flows from operating profits beforechanges in operating assets and liabilities
728
Net changes in operating assets and liabilities:
Decrease (increase) in due from otherfinancial institutions – term
893
Increase in trading securities(227)(Increase) decrease in derivative financial instruments(497)
Decrease in available-for-sale assets
315
Increase in loans and advances(4,344)
Increase in due from subsidiary companies–
Decrease in other assets
	130
Increase (decrease) in due to other financial
institutions – term
	1,223
Increase in deposits and other borrowings
	1,416
Increase (decrease) in payables and other liabilities 	137

695

1,250

531	

393

628

(1,042)
(739)
70
886
(4,476)
–
415

(128)
(576)
330
957
(8,550)
–
117

894
(226)
(500)
315
(4,343)(38)
144(1,931)
(739)
64
896
(4,471)
(147)
404

(302)
(576)
301
967
(8,553)
(75)
123

(571)
1,565
(237)

(386)
2,883
(375)

(1)
2,863
87

26
2,944
(258)

(107)
5,301
(399)

Net cash flows used in operating activities(226)(3,434)(4,478)(274)(2,819)(2,692)

–
10
585
	16

–
–
21

12
–
87

–
–
2

–
–
55

–
1,091
57

(2)
–
(8)
(25)

(4)
–
(4)
(98)

(7)
(5)
(10)
(228)

–
–
(7)
(7)

(4)
(1,230)
(4)
(5)

(5)
(1,235)
(9)
(25)

566

(85)

(151)

(12)

(1,188)(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 subsidiaries
Increase (decrease) in related party funding
Dividends paid

2,251	
(503)
250
–
–
44
–

4,026
(69)
–
–
–
(7)
–

6,337
(663)
400
(100)
–
70
(900)

27
–
250
–
2,420
44
–

302
(16)
–
–
4,211
(7)
–

312
(482)
400
(100)
4,156
70
(900)

Net cash flows provided by financing activities		

2,042

3,950

5,144

2,741	

4,490

3,456

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

(226)
566
2,042

(3,434)(85)
3,950(4,478)
(151)
5,144

(274)
(12)
2,741	

(2,819)(1,188)4,490(2,692)
(126)
3,456

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

2,382
2,728

431
2,213

515
2,213

2,455
3,865

483
3,227

638
3,227

Cash and cash equivalents at end of the period		

5,110

2,644

2,728

6,320

3,710

3,865

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

5,741	
2,305
(2,936)

1,997
3,921
(3,274)

2,698
3,998
(3,968)

5,740
2,303
(1,723)

1,997
3,918
(2,205)

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

5,110

2,644

2,728

6,320

3,710

3,865

Cash flows from investing activities
Proceeds from sale of shares in associates andjointly controlled entities
Proceeds related to sale of controlled entities1
Proceeds from sale of premises and equipment
Purchase of shares in associates and jointly
controlled entities
Acquisition of shares in subsidiary companies
Purchase of intangible assets
Purchase of premises and equipment

45

Net cash flows provided by (used in) investing
activities		

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.
The notes on pages 8 to 85 form part of and should be read in conjunction with these financial statements.
1
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 DisclosureStatement (Full and Half Year – New Zealand Incorporated
Banks) Order 2007 (the ‘Order’). The parent company’s financial
statements are for ANZ National Bank Limited (the ‘Bank’) as aseparate entity and the consolidated financial statements are for
the ANZ National Bank Limited Group (the ‘Banking Group’and reporting entity), which includes subsidiaries and associatecompanies disclosed in Note 47 Controlled Entities, Associatesand 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
Board of Directors on 1 May 2007.
(ii)

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

(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 has elected toprepare financial statements using NZ IFRS as issued by theInternational Accounting Standards Board and approved by the
Accounting Standards Review Board (‘ASRB’).
The accounting policies set out below have been consistently
applied to all periods presented in these financial statements,
except for a change in the recognition of financial guarantee
contracts. With effect from 1 October 2006, financial guarantee
contracts are recognised initially at fair value. After initialrecognition, such contracts are measured at the higher of theamount determined in accordance with NZ IAS 37: Provisions,Contingent Liabilities and Contingent Assets, or the amountinitially recognised. There was no financial impact on adoptionof this amendment to NZ IAS 39: Financial Instruments:
Recognition and Measurement.
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
beginning on or after 1 January 2007. Application of NZ IFRS 7
will result in changes to disclosures about the risks arising fromfinancial instruments. The initial application of NZ IFRS 7 is
not expected to have an impact on the financial results.
(iv) Measurement base
The financial statements have been prepared on a going concern
basis in accordance with historical cost concepts except that thefollowing assets and liabilities are stated at their fair value:
derivative financial instruments, assets treated as available forsale, financial instruments held for trading, certain financial
liabilities designated at fair value through profit or loss, certain
assets and liabilities designated as part of fair value hedging
arrangements and defined benefit scheme assets and liabilities.

(v)

Accounting estimates
The preparation of the financial statements requires the use ofmanagement judgement, estimates and assumptions that affectreported amounts and the application of policies. The estimatesand associated assumptions are based on historical experienceand various other factors that are believed to be reasonable.
Actual results may differ from these estimates.
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.

(vi) Consolidation
These financial statements consolidate the financial statementsof 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 an entity so as to obtain benefits from its activities.
Where subsidiaries have been sold or acquired during theperiod, their operating results have been included to the date
control ceases or from the date control is transferred to the
Banking Group.
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
at acquisition date. The excess of the cost of acquisition over thefair value of the Banking Group’s share of the identifiable net
assets acquired is recorded as goodwill. If the cost of acquisitionis less than the fair value of the Banking Group’s share of the net
assets of the subsidiary acquired, the difference is recognised
directly in the income statement.
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 havebeen changed where necessary to ensure consistency with thepolicies adopted by the Banking Group.
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 business activities of the joint venture
require the unanimous 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.

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. The
accounting policies of an associate or jointly controlled entity
have been changed where necessary to ensure consistency withthe policies adopted by the Banking Group.

Loan commitment fees (together with related direct costs), aredeferred and recognised as an adjustment to the effective intereston 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 included ininterest income as part of the effective interest rate.
(x)

Fee and commission income
Fees and commission income integral to the effective yield of afinancial asset or liability are recognised as an adjustment to theeffective interest calculation and included in net interest income.

Interests in associates and jointly controlled entities are reviewed ateach reporting date for impairment. Any impairment is recognisedin the income statement.

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.

All significant activities of the Banking Group, with the exceptionof the ING New Zealand Joint Venture, are operated throughwholly owned and controlled entities.

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.

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.
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.
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. The
application of the method has the effect of recognising income andexpense on the financial asset or liability evenly in proportion to
the amount outstanding over the period to maturity or repayment.

(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:••••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.
(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. Gains and losses
on subsequent revaluation are taken to the income statement. 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.

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES	10NOTES TO THE FINANCIAL STATEMENTS (continued)
1.

ACCOUNTING POLICIES (continued)(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.

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 derecognised.

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).

When a forecast transaction is no longer expected to occur, theamount deferred in equity is recognised in the income statement.

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 valueof the hedged asset or liability are also recognised in the income
statement with a corresponding adjustment to the carrying valueof the hedged item.
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
is sold or repaid, the balance of the adjustment to the carrying
value of the hedged item is recognised in the income statement
immediately.
(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 recognised in theincome statement. Amounts deferred in equity are recognised in
the income statement in the year during which the hedged forecast
transactions take place. Where the forecast transaction that ishedged results in the recognition of a non-financial asset or nonfinancial liability, the gain or loss previously deferred in equity istransferred from equity and included in the initial measurement of
the cost of the asset or liability.

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 recognised in the income statement.
(xv) Available-for-sale assets
Available-for-sale assets comprise those securities which the
Banking Group intends to hold for an indefinite period such as
certain fixed term securities, normally until maturity, but which
may be sold in response to liquidity needs. They are initially
recorded at fair value plus transaction costs. Subsequent gains orlosses arising from changes in fair value are included as a separate
component of equity called the ‘available-for-sale revaluation
reserve’. When the asset is sold the cumulative gain or loss related
to the asset is transferred from equity to the income statement.
Where there is objective evidence of impairment, the cumulativeloss previously recognised in equity from the decline in fair valueof the asset is removed from equity and recognised in the income
statement. If in a subsequent period the amount of an impairment
loss for a security decreases and the decrease can be linked
objectively to an event occurring after the impairment event, theloss previously recognised in the income 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 method.
(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 and not classified as available-for-sale. The loans andadvances are initially recognised at fair value including transaction
costs that are directly attributable to the issue of the loan oradvance. 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 expiredor the Banking Group has transferred substantially all the risks andrewards of ownership.
Net loans and advances include direct finance provided tocustomers such as bank overdrafts, credit cards, term loans,finance lease receivables and commercial bills. Overdrafts,

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES	11
NOTES TO THE FINANCIAL STATEMENTS (continued)
1.

ACCOUNTING POLICIES (continued)
credit cards and term loans are carried at principal balances
outstanding. Customer financing through redeemable preference
shares is included within net loans and advances. Dividends
received on redeemable preference shares are taken to the income
statement as part of interest income, when there is a right to receive
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 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.
(xvii) Operating leases
Leases as lessee
Operating lease payments are recognised as an expense on asystematic 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.
Operating lease assets are stated at cost less accumulated
depreciation and are included as part of premises and equipment.
Depreciation is calculated using a systematic basis over theestimated useful lives of those assets after deducting any residual
values. Residual values are reviewed at each reporting date toensure they represent the amounts that the Banking Group would
currently obtain from disposing of the asset, after deducting theestimated 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 deposits and other borrowings.

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES	12NOTES TO THE FINANCIAL STATEMENTS (continued)
1.

ACCOUNTING POLICIES (continued)
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.

Leasehold improvements are amortised on a straight-line basis
over the shorter of their useful lives or remaining terms of thelease.

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.

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 amountthe difference is charged to the income statement. Where the asset
does not generate cash flows that are independent from otherassets, the Banking Group estimates the recoverable amount of the
cash generating unit to which the asset belongs. An impairment
loss recognised in prior periods may be reversed if there has beena change in the estimates used to determine the asset’s recoverable
amount.

(xix) Goodwill and other intangible assets
Goodwill
Purchased goodwill, representing the excess of the purchaseconsideration over the fair value of the identifiable net assets ofa 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 andtested for impairment annually, or more frequently where there isan 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 benefitsof the cash generating unit to which goodwill has been allocated.
Where the assessment results in the current carrying value of
goodwill exceeding the value of expected future benefits, thedifference is charged to the income statement. Any impairment
writedown of goodwill is not reversed 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 comprise 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%(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 initial 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.
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 tax base balance 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.

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES	13
NOTES TO THE FINANCIAL STATEMENTS (continued)
1.

ACCOUNTING POLICIES (continued)
The measurement reflects the tax consequences that would follow
from the manner in which the Banking Group, at the reporting
date, recovers or settles the carrying amount of its assets andliabilities.
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.
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
The Banking Group elected to apply the amendments to NZ IAS
19 Employee Benefits (issued May 2005) early, with effect from 1
October 2005. As a result, defined benefit superannuation scheme
actuarial gains and losses are taken directly to retained profits.
Comparatives have also been restated on this basis.
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 a personnel expense in theincome statement when due. Prepaid contributions are recognised
as an asset to the extent that a cash refund or a reduction in future
payments is available. The Banking Group has no further payment
obligations once the contributions have been paid.
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:•••

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; andcash contributions incurred are recognised directly against the
net defined benefit liability or asset.

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.
Share Options
The fair value of ANZ share options is measured at grant date,using a Black-Scholes option pricing model. The fair value isexpensed on a straight-line basis over the relevant vesting period.
This is recognised as an employee compensation expense with acorresponding increase in the share options liability account.
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.

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES	14
NOTES TO THE FINANCIAL STATEMENTS (continued)
1.

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

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.
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.

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES	15
NOTES TO THE FINANCIAL STATEMENTS (continued)
1.

ACCOUNTING POLICIES (continued)(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 period, 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. Not withstanding 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.

(a) Credit provisioning
Provisions for impairment in customer loans and advances are raisedby management to cover actual and expected losses arising from past
events. Losses for impaired loans are recognised promptly when there
is objective evidence that impairment of a loan or portfolio of loans
has occurred. Impairment losses are calculated on individual loans andon loans assessed collectively. Losses expected from future events, nomatter 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 whichhave been 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 31 March 2007 for the Banking Group, total provision for credit
impairment was $457 million representing 0.56% of total net loans andadvances (31/03/2006 $493 million or 0.67%; 30/09/2006 $460 million
or 0.59%). Of the total provision for 31 March 2007, $410 million
represented collective provisions and $47 million represented individual
provisions.
As at 31 March 2007 for the Bank, total provision for credit impairment
was $413 million representing 0.53% of total net loans and advances(31/03/2006 $433 million or 0.62%; 30/09/2006 $415 million or 0.56%).
Of the total provision for 31 March 2007, $375 million represented
collective provisions and $38 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.
(b) 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 (including
customer-related reasons) 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 relationshipmust be formally designated and documented at the inceptionof the hedge.
• Prospective Effectiveness: This is a forward-looking testof whether a hedging relationship is expected to be highly
effective in future periods. The hedge must be expected to behighly effective in achieving offsetting changes in fair value
or cash flows attributable to the hedged risk, consistently withthe originally documented risk management strategy for thatparticular hedging relationship for hedge accounting to beachievable.

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 item thatare attributable to the hedged risk and the fair value of the hedging
instrument can be reliably measured. Prospective hedge effectivenesstesting is required at least quarterly.
•

Retrospective Effectiveness: This is a backward-looking testof whether 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 thehedge must be within a 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 Groupcan be 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.
(c) 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.

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
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.
(d) 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 31 March 2007,
the carrying value of the Banking Group’s investment in ING NZ was$177 million (31/03/2006 $157 million; 30/09/2006 $167 million). The
carrying value of the Bank’s investment in ING NZ was $196 million(31/03/2006 $176 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.

As at 31 March 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, of which $3,230 million relates to the acquisition
of NBNZ Holdings Limited in December 2003 (31/03/2006 $3,263
million; 30/09/2006 $3,266 million).

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.

As at 31 March 2007, the balance of goodwill recorded as an asset on the
Bank’s consolidated 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 (31/03/2006 $3,217 million; 30/09/2006$3,217 million).

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 write-down 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 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 Credit services the Banking Group’s corporate and investment banking activities, Rural Credit services the Banking Group’s rural
lending activities, Retail Credit services the Banking Group’s small business and consumer customers, and Portfolio Risk Management in turn provides
an independent overview of credit risk across the Bank at a portfolio level. The Banking Group allows sole discretion for transaction approvals at theBusiness Unit level in the retail and rural lending sectors, with larger transactions approved by Retail Credit or Rural Credit.
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 relatively likelihood of
those outcomes.

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 VaR, aggregate market position and 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. This methodology isbased 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 Value at Risk
(VaR) framework and 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 theirequity 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. The Banking Group’s Risk Committee provides
policy and framework, measurement, monitoring and reporting, as well as leadership in areas such as technology risk and payments risk. The Board and
Risk Management conduct effective monitoring and oversight.

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.
In addition, Compliance, a discrete function within Risk Management, is responsible for working in conjunction with Business Unit Compliance teams
and other risk management areas to provide a compliance infrastructure and framework to facilitate planning, reporting and management of new andchanging business obligations and processes.
Compliance 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 for the 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 suchas anti-money laundering procedures and matters of prudential compliance. The Banking Group’s Risk Committee, the Chief Risk Officer, the Board andthe 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 has no reporting line to ANZ Management. Internal Audit reports directly to the Chairman of the Audit Committee.
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;
The completeness and accuracy of the financial and other records of 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; andThe effectiveness of operations undertaken by the Banking Group.

In performing this role, Internal Audit adopts a risk-based approach, encompassing reviews of the major credit, market and operating risks within the
Banking Group. Significant findings are reported quarterly to the Audit Committee of the Banking Group. The Head of Internal Audit of the Banking
Group makes a quarterly attestation on the adequacy of internal controls.
A Strategic Audit Plan is prepared annually covering each business area of the Banking Group, with greater emphasis placed on those areas where thehighest risk exists. The Plan is endorsed by the Audit Committees of the Banking Group and the Ultimate Parent Banking Group.
Integration Review
The Bank has confirmed to the Reserve Bank of New Zealand (‘RBNZ’) that it has achieved compliance with the Bank’s Condition of Registration 13(i)which requires that by no later than 31 December 2005, the Bank should locate and continue to operate in New Zealand the Bank’s domestic system andthat the board of directors of the Bank will have legal and practical ability to control the management and operation of the domestic system.
Plans to achieve compliance with Condition 13(ii), which relates to the board of directors having legal and practical ability to control the management
and operation of the international system, have been reassessed in light of the release of the RBNZ’s final Outsourcing Policy (BS11). The Bank is
continuing to work with the RBNZ to agree a plan to achieve compliance with the Outsourcing Policy (which will eventually be embodied in replacement
Condition(s) of Registration for the existing Condition 13) particularly with respect to the Bank’s international system.
As part of this process, the RBNZ has:•••

Advised that it is satisfied with the Bank’s Self Assessment of outsourced business functions and governance arrangements;
Commenced reviewing the Bank’s revised Compliance Plan; andAdvised the Bank of an extension to the completion date for condition 13(ii) to 30 June 2007, with effect from 4 December 2006.

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES21

NOTES TO THE FINANCIAL STATEMENTS (continued)
4.

INCOME

Continuing operations

Consolidated
Unaudited
Unaudited
Audited
6 months to 6 months toYear to31/03/2007 31/03/2006 30/09/2006
$m
$m
$m

ParentUnaudited
Unaudited
6 months to 6 months to
31/03/2007 31/03/2006$m$m

AuditedYear to30/09/2006$mInterest income
Other financial institutions
Trading securities
Available-for-sale assets
Lending on productive loans
Lending on impaired assets (Note 14)
Subsidiary companies
Related parties
Other

117
110
6
3,505
2
–
9
174

177
52
39
3,096
3
–
6
82

412
156
52
6,435
7
–
11
133

97
110
5
3,354
2
29
9
171	

148
52
39
2,935
3
24
6
80

355
156
51
6,100
7
79
11
133

Total interest income

3,923

3,455

7,206

3,777

3,287

6,892

277
1	
61	
–
21	
19
4

268
–
91
15
7
(3)
6

543
1
152
13
(6)
3
1

256
101	
60
–
21	
19
4

247
–
91
15
7
(3)
6

504
153
152
13
(6)
4
1

1	
27

5
37

3
70

1	
23

5
34

3
61

Total other operating income

411	

426

780

485

402

885

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

51	
22
281	

45
21
277

92
42
559

51	
13
269

46
11
265

94
25
535

Total fee income

354

343

693

333

322

654

Direct fee expense

77

75

150

77

75

150

Net fee income

277

268

543

256

247

504

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 (loss) on hedges not qualifying for hedge accounting
Net ineffectiveness on qualifying hedges
Net gain on financial liabilities designated at fair value throughprofit or loss
Other income

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

EXPENSES

Continuing operations

Consolidated
Unaudited
Unaudited
Audited
6 months to 6 months toYear to31/03/2007 31/03/2006 30/09/2006
$m
$m
$m

ParentUnaudited
Unaudited
6 months to 6 months to
31/03/2007 31/03/2006$m$m

AuditedYear to30/09/2006$mInterest expense
Other financial institutions
Deposits and other borrowings
Subsidiary companies1
Bonds and notes
Related party funding
Loan capital
Other

111	
2,028
–
472
100
74
31	

102
1,755
–
335
94
55
96

213
3,716
–
744
190
117
97

43
1,784
974
15
100
74
5

63
1,517
769
26
94
55
86

119
3,221
1,824
46
190
117
72

Total interest expense

2,816

2,437

5,077

2,995

2,610

5,589

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
Writedown of investment in subsidiary company
Other costs

323
28

310
32

623
63

306
28

295
31

592
61

17
3
7
18
21	
37
–
34
–
165

18
3
5
17
21
35
49
34
–
159

35
6
10
34
43
73
49
67
–
320

17
3
7
7
10
7
–
81	
–
163

18
3
5
7
13
12
49
69
–
155

35
6
10
14
24
20
49
145
1
316

Total operating expenses

653

683

1,323

629

657

1,273

Related party and integration operating expenses are predominantly recharges from Australia and New Zealand Banking Group Limited (Ultimate
Parent Company).
Consolidated
Unaudited
Unaudited
Audited
6 months to 6 months toYear to31/03/2007 31/03/2006 30/09/2006
$’000
$’000
$’000

ParentUnaudited
Unaudited
6 months to 6 months to
31/03/2007 31/03/2006
$’000
$’000

AuditedYear to30/09/2006$’000

Auditors’ remuneration to KPMG comprises:
Audit or review of financial statements
Other audit-related services

808
57

972
359

1,798
486

597
56

829
352

1,308
362

Total auditors’ remuneration

865

1,331

2,284

653

1,181

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 materially 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 materially in conflictwith the role of auditor 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
Unaudited
Unaudited
Audited
6 months to 6 months toYear to31/03/2007 31/03/2006 30/09/2006
$m
$m
$m

ParentUnaudited
Unaudited
6 months to 6 months to
31/03/2007 31/03/2006$m$m

AuditedYear to30/09/2006$m

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

846

760

1,590

620

422

921

Prima facie income tax at 33%

279

251

525

205

139

304

Rebateable and non-assessable dividends
Other permanent items

(7)
14

(4)
(5)

(7)
9

(33)
23

–
(4)

(51)
60

Income tax under (over) provided in prior years

286
1	

242
–

527
(4)

195
–

135
–

313
(3)

Total income tax expense from continuing operations

287

242

523

195

135

310

–

1

3

–

–

–

33.9%

31.8%

32.9%

31.5%

32.0%

33.7%

265

193

426

168

89

213

1	

–

(4)

–

–

(3)

21	

49

101

27

46

100

287

242

523

195

135

310

Discontinued operations
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
Total income tax expense recognised in income
statement – continuing operations
The following amounts were charged or (credited)directly to equity:
Current income tax
Actuarial gain (loss) on defined benefit schemesDeferred income tax
Net gain (loss) on revaluation of cash flow hedges

3

(1)

(1)

3

(1)

(1)

10

(20)

6

10

(20)

6

Total income tax expense (credit) recognised directlyin equity

13

(21)

5

13

(21)

5

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

642
17
174
–
–

492
12
23
–
169

492
17
211
(247)
169

483
8
126
–
–

286
9
–
–
245

286
56
135
(247)
253

Balance at end of the period

833

696

642

617

540

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.

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES24

NOTES TO THE FINANCIAL STATEMENTS (continued)
7.

LIQUID ASSETS
Unaudited
31/03/2007
$m

8.

9.

Consolidated
Unaudited
Audited31/03/2006 30/09/2006$m$m

Unaudited
31/03/2007$m

ParentUnaudited
31/03/2006$m

Audited30/09/2006$m

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

4,286
25
1,358
72

477
–
1,424
96

1,046
–
1,493
159

4,286
25
1,357
72

477
–
1,424
96

1,046
–
1,493
159

Total liquid assets

5,741	

1,997

2,698

5,740

1,997

2,698

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

4,041	

218

806

4,041	

218

806

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

776
604
1,687

842
1,049
5,219

1,019
657
3,941

776
604
1,200

838
1,049
4,623

1,017
657
3,437

Total due from other financial institutions

3,067

7,110

5,617

2,580

6,510

5,111

Included within due from other financial institutions
are the following balances:
Assets used to secure deposit obligations
Assets encumbered through repurchase agreements

208
25

224
1,034

–
1,164

208
25

224
1,034

–
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)

208

224

51

208

224

51

Government, Local Body stock and bonds
Certificates of deposit
Promissory notes
Other

209
1,430
178
100

155
958
443
96

198
1,112
212
74

208
1,430
178
100

155
958
443
96

198
1,112
212
74

Total trading securities

1,917

1,652

1,596

1,916

1,652

1,596

208

155

198

208

155

198

DUE FROM OTHER FINANCIAL INSTITUTIONSTRADING 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

Unaudited
1 month to
31/10/2006$m

Truck Leasing Limited
Unaudited
Audited
6 months toYear to31/03/2006
30/09/2006$m$m

Interest income
Interest expense

–
2

–
13

1
28

Net interest expense

(2)

(13)

(27)

Other operating income1

3

22

45

Net operating income
Operating expenses

1	
1	

9
5

18
9

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

–
–

4
1

9
1

Operating profit before income tax
Income tax expense

–
–

3
1

8
3

Operating profit after income tax – discontinued operations

–

2

5

Gain on sale of discontinued operations

76

–

–

Net profit from discontinued operations

76

2

5

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

15
(3)

53
(59)

114
(116)

Net cash flows from discontinued operations

12

(6)

(2)

14

81

162

8
3

45
14

90
28

3

22

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
			
Audited			
30/09/2006
			$mAssets classified as held for sale
Net loans and advances
3
Current tax assets
2
Other assets
40
Deferred tax assets
6
Premises and equipment (including operating lease assets)
486
Goodwill
1
Total assets

538

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

23
1
29

Total liabilities

53

The sale resulted in the following impact on the consolidated financial statements:
			 Consolidated
			
Unaudited			
31/10/2006
			$mCash 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 are subject to the same types of credit and market risk asother 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 exchangeinterest 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 theoption 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 riskarises 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 theevent of counterparty 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.
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 instrumentson hand, the extent to which the instruments are favourable or unfavourable, and thus the aggregate fair values of derivative financial assets andliabilities, can fluctuate 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 theaggregate 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 andobligations 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.
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 andliabilities, as transactions are usually settled on a gross basis. However, the credit risk associated with favourable contracts is reduced by a masternetting 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 ashort period, as it is affected by each transaction subject to the arrangement.

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES28

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

Unaudited 31/03/2007
Derivatives held for trading
Foreign exchange derivatives
Spot and forward contracts
Swap agreements
Options purchased
Options soldNotional
Principal
Amount$m

24,679725
42,4762,284
3,135	123
2,837–
73,127

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

445
799
89
–

632
912
–
86

3,132	1,333	1,630

Notional
Principal
Amount$m

ParentCreditEquivalent
Amount$m

24,679725
42,4762,284
3,135	123
2,837–
73,127

Fair values
Assets Liabilities
$m
$m

445
799
89
–

632
912
–
86

3,132	1,333	1,630

36,217	1	1	
536,217	1	1	
5259,843
2,231	1,406	1,494
261,1262,262	1,431	1,519
19,742–
3
28	19,742–
3
28
1,260	11	7
–	1,260	11	
7
–
1,179
–
–
6	1,179––6
318,241	Equity derivatives
Options purchased

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

2,243	1,417	1,533

319,524

2,274	1,442	1,558

20

21	

20

–

20

21	

20

–

391,388

5,396

2,770

3,163

392,671	

5,427

2,795

3,188

Derivatives held for hedging(a) Designated as cash flow hedges
Interest rate derivatives
Swap agreements
10,1137740

46	10,113

77

40

46

Total derivatives designatedas cash flow hedges

10,1137740

46	10,113

77

40

46

(b) Designated as fair value hedges
Foreign exchange derivatives
Swap agreements
82

6

2	10

82

6

2	10

Total derivatives held for
trading

Interest rate derivatives
Swap agreements

31,889422

281	11030,789

419

281	

82

Total derivatives designated asfair value hedges

31,971	

428

283	120

30,871	

425

283

92

Total derivatives held forhedging

42,084505

323	166

40,984502

323	138

433,472

5,901	

3,093

3,329

433,655

5,929

3,118

3,326

Collateral received / paid

–

–

(52)

(161)

–

–

(52)

(161)

Total derivative financial
instruments

433,472

5,901	

3,041	

3,168

433,655

5,929

3,066

3,165

Hedge accounting
Cash flow hedges
The Banking Group hedges the cash flows from floating rate customer deposits and floating rate wholesale funding arrangements that fund fixed
rate lending using cross currency and interest rate swaps. There were no transactions where cash flow hedge accounting ceased in the six months
ended 31 March 2007 as a result of highly probable cash flows that were no longer expected to occur (31/03/2006 no transactions; 30/09/2006 notransactions).
Fair valuation gains and losses deferred to the cash flow hedging reserve are transferred to the income statement over the same period as the cash
flows from the hedging transaction occur.
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 carried on balance sheet
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)
Consolidated
Notional
Credit			Principal Equivalent
Fair values		
AmountAmountAssetsLiabilities
Unaudited 31/03/2006
$m
$m
$m
$m
Derivatives held for trading
Foreign exchange derivatives
Spot and forward contracts
Swap agreements
Options purchased
Options soldNotional
Principal
Amount$m

ParentCreditEquivalent
Amount$m

Fair values
AssetsLiabilities$m$m

29,01739,317
3,033
3,227

1,617
3,320
72
–

1,280
1,908
32
–

715
1,154
–
39

29,01739,317
3,033
3,227

1,617
3,320
72
–

1,280
1,908
32
–

715
1,154
–
39

74,594

5,009

3,220

1,908

74,594

5,009

3,220

1,908

20,813
114,718
20,658
1,606
1,586

5
1,057
–
7
–

4
646
1
4
–

4
728
–
–
4

20,813
114,344
20,658
1,606
1,586

5
1,057
–
7
–

4
646
1
4
–

4
717
–
–
4

159,381

1,069

655

736

159,007

1,069

655

725

30

22

19

–

30

22

19

–

234,005

6,100

3,894

2,644

233,631

6,100

3,894

2,633

Derivatives held for hedging(a) Designated as cash flow hedges
Interest rate derivatives
Swap agreements
8,003

49

10

109

8,003

49

10

109

Total derivatives designatedas cash flow hedges

8,003

49

10

109

8,003

49

10

109

(b) Designated as fair value hedges
Interest rate derivatives
Swap agreements
25,153

146

77

174

25,153

146

77

174

Total derivatives designated asfair value hedges

25,153

146

77

174

25,153

146

77

174

Total derivatives held forhedging

33,156

195

87

283

33,156

195

87

283

267,161

6,295

3,981

2,927

266,787

6,295

3,981

2,916

–

–

(333)

–

–

–

(333)

–

267,161

6,295

3,648

2,927

266,787

6,295

3,648

2,916

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

Equity derivatives
Options purchased
Total derivatives held for
trading

Collateral received
Total derivative financial
instruments

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES30NOTES TO THE FINANCIAL STATEMENTS (continued)
11. DERIVATIVE FINANCIAL INSTRUMENTS (continued)
Consolidated
Notional
Credit			Principal Equivalent
Fair values		
AmountAmountAssetsLiabilities
Audited 30/09/2006
$m
$m
$m
$m
Derivatives held for trading
Foreign exchange derivatives
Spot and forward contracts
Swap agreements
Options purchased
Options soldNotional
Principal
Amount$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 designated as
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 designated asfair value hedges

27,533

215

107

173

26,960

214

105

168

Total derivatives held forhedging

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 COMPANIES31

NOTES TO THE FINANCIAL STATEMENTS (continued)
12. AVAILABLE-FOR-SALE ASSETS
Unaudited
31/03/2007$mConsolidated
Unaudited
Audited31/03/2006 30/09/2006$m$m

Unaudited
31/03/2007$m

ParentUnaudited
31/03/2006$m

Audited30/09/2006$m

Government, Local Body stock and bonds
Floating rate notes
Other

3
42
–

526
30
–

316
39
4

3
32
–

526
20
–

316
29
4

Total available-for-sale assets

45

556

359

35

546

349

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

40

221

–

40

221

13. NET LOANS AND ADVANCES
Overdrafts
Credit card outstandings
Term loans – housing
Term loans – non-housing
Finance lease receivables

2,061	
1,303
46,56432,605
752

1,959
1,208
40,92330,110
708

1,907
1,238
43,472
31,547776

2,061	
1,303
46,56429,318
40

1,959
1,208
40,891
26,754
70

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

83,285
(457)
(264)
(364)
(50)
108

74,908
(493)
(249)
(18)
(51)
79

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

79,286
(413)
–
(364)
(47)
108

70,882
(433)
–
(18)
(48)
79

74,943
(415)
–
(119)
(48)
92

Total net loans and advances

82,25874,17678,15578,57070,46274,453

230

155

58

234

213

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 COMPANIES32

NOTES TO THE FINANCIAL STATEMENTS (continued)
14. IMPAIRED ASSETS, PAST DUE ASSETS AND OTHER ASSETS UNDER ADMINISTRATION
Consolidated
Unaudited
Unaudited
AuditedUnaudited
31/03/2007 31/03/2006 30/09/2006
31/03/2007
$m
$m
$m
$m

ParentUnaudited
31/03/2006$m

Audited30/09/2006$m

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

151	
84
(8)
(67)
(41)

213
111
(8)
(73)
(36)

213
190
(10)
(165)
(77)

129
66
(5)
(56)
(38)

186
89
(7)
(63)
(30)

186
150
(8)
(135)
(64)

Balance at the end of the period

119

207

151

96

175

129

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

86
190
(157)

72
142
(127)

72
306
(292)

78
169
(141)

63
122
(107)

63
268
(253)

Balance at the end of the period

119

87

86

106

78

78

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

–
3

–
–

–
–

–
3

–
–

–
–

Balance at the end of the period

3

–

–

3

–

–

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

241	

294

237

205

253

207

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

8
(3)

7
–

7
1

8
(3)

7
–

7
1

Total off-balance sheet impaired assets

5

7

8

5

7

8

Interest foregone on impaired assets
Gross interest receivable on impaired assets
Interest recognised1

7
(2)

9
(3)

15
(7)

7
(2)

8
(3)

14
(7)

Total net interest not recognised

5

6

8

5

5

7

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)
15. PROVISION FOR CREDIT IMPAIRMENT
Unaudited
31/03/2007$mConsolidated
Unaudited
Audited31/03/2006 30/09/2006$m$m

Unaudited
31/03/2007$m

ParentUnaudited
31/03/2006$m

Audited30/09/2006$m

Collective provision
Balance at beginning of the period
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
–
–
8

568
(154)
–
(9)

568
(154)
(2)
(10)

364
–
–
11

565
(197)
–
(6)

565
(197)
–
(4)

Balance at end of the period

410

405

402

375

362

364

Individual provision (impaired assets)
Balance at beginning of the period
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 – discontinued operations
Recoveries
Bad debts written off
Discount unwind1

58
–
–
–
22
–
10
(41)
(2)

98
(6)
–
–
22
1
12
(36)
(3)

98
(6)
(1)
–
28
1
22
(77)
(7)

51	
–
–
–
18
–
9
(38)
(2)

81
(6)
–
–
18
–
11
(30)
(3)

81
(6)
–
7
20
–
20
(64)
(7)

Balance at end of the period

47

88

58

38

71

51

Total provision for credit impairment

457

493

460

413

433

415

Total provision for credit impairment has been deducted from gross loans and advances.
Provision movement analysis
New and increased provisions
Provision releases

43
(11)

43
(9)

91
(41)

38
(11)

37
(8)

80
(40)

Recoveries

32
(10)

34
(12)

50
(22)

27
(9)

29
(11)

40
(20)

Individual provision charge
Collective provision charge (credit)

22
8

22
(9)

28
(10)

18
11	

18
(6)

20
(4)

Provision for credit impairment – continuing operations
Provision for credit impairment – discontinued operations

30
–

13
1

18
1

29
–

12
–

16
–

Provision for credit impairment

30

14

19

29

12

16

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 COMPANIES34

NOTES TO THE FINANCIAL STATEMENTS (continued)
16. INVESTMENT IN CONTROLLED ENTITIES, ASSOCIATES AND JOINTLY CONTROLLED ENTITIES
Unaudited
31/03/2007$mConsolidated
Unaudited
Audited31/03/2006 30/09/2006$m$m

Unaudited
31/03/2007$m

ParentUnaudited
31/03/2006$m

Audited30/09/2006$m

Shares in controlled entities
Unquoted at cost

–

–

–

7,464

8,591

7,490

Shares in associates
Unquoted at cost plus equity accounted adjustments

5

13

3

3

3

3

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

185

161

174

202

180

191

Total shares in controlled entities, associates andjointly controlled entities

190

174

177

7,669

8,774

7,684

Shares in associates comprises:
Balance at beginning of the period
Acquisitions
Disposals

3
2
–

13
–
–

13
–
(10)

3
–
–

3
–
–

3
–
–

Balance at end of the period

5

13

3

3

3

3

Shares in jointly controlled entities comprises:
Balance at beginning of the period
Acquisitions
Share of profit of equity accounted jointly controlled entities

174
–
11	

145
4
12

145
7
22

191	
–
11	

164
4
12

164
5
22

Balance at end of the period

185

161

174

202

180

191

Shares in associates at 31 March 2007 includes goodwill of$2 million (31/03/2006 $nil; 30/09/2006 $nil).

Shares in jointly controlled entities at 31 March 2007 includes
goodwill of $93 million (31/03/2006 $90 million; 30/09/2006 $93 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

481	
11	
14
38
34
44
178

423
11
6
15
26
16
109

443
11
6
36
25
310
59

414
8
14
38
28
44
140

357
8
6
15
20
16
83

383
8
6
36
18
310
36

Total other assets

800

606

890

686

505

797

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES35NOTES TO THE FINANCIAL STATEMENTS (continued)
18. DEFERRED TAX ASSETS
Unaudited
31/03/2007$mConsolidated
Unaudited
Audited31/03/2006 30/09/2006$m$m

Unaudited
31/03/2007$m

ParentUnaudited
31/03/2006$m

Audited30/09/2006$m

Deferred tax assets
Balance at beginning of the period
Adjustment on adoption of NZ IAS 39 on 1 October 2005
Transfer from deferred tax liabilities
Transfer to held for sale assets
Credited (charged) to income statement – continuing operations

332
–
–
–
21	

415
(30)
(6)
–
(16)

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

307
–
–
–
17

395
(43)
(6)
–
(18)

395
(43)
(6)
–
(39)

Balance at end of the period

353

363

332

324

328

307

Deferred tax assets comprise the following temporary differences:
Provision for credit impairment
151	
Deferred fee revenue and expenses
4
Premises and equipment
4
Software33
Provisions and accruals
93
Derivative financial instruments
47
Other
21	

163
8
4
20
104
9
55

152
5
4
32
99
9
31

137
4
(1)
32
84
47
21	

143
8
(1)
19
95
9
55

137
5
(1)
31
95
9
31

Total deferred tax assets

353

363

332

324

328

307

The deferred tax credited (charged) 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

(1)
(1)
–
1	
(6)
38
(10)

(3)
–
–
2
5
(29)
9

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

–
(1)
–
1	
(11)
38
(10)

(4)
–
(5)
1
8
(29)
11

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

Total deferred tax credited (charged) to the income
statement – continuing operations

21	

(16)

(41)

17

(18)

(39)

There was no deferred tax asset charged or credited to equity as at 31 March 2007 (31/03/2006 $nil; 30/09/2006 $nil).
There are no unrecognised deferred tax assets as at 31 March 2007 (31/03/2006 $nil; 30/09/2006 $nil).

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES36NOTES TO THE FINANCIAL STATEMENTS (continued)
19. PREMISES AND EQUIPMENT
Unaudited
31/03/2007$mConsolidated
Unaudited
Audited31/03/2006 30/09/2006$m$m

Unaudited
31/03/2007$m

ParentUnaudited
31/03/2006$m

Audited30/09/2006$m

Freehold and leasehold land and buildings
At costAccumulated depreciation

68
(11)

68
(11)

68
(11)

–
–

–
–

–
–

Total carrying amount

57

57

57

–

–

–

Leasehold improvements
At costAccumulated depreciation

94
(71)

99
(71)

98
(71)

1	
–

4
(3)

3
(2)

Total carrying amount

23

28

27

1	

1

1

Operating lease assets
At costAccumulated depreciation

–
–

729
(231)

–
–

–
–

–
–

–
–

Total carrying amount

–

498

–

–

–

–

236
(159)

224
(160)

233
(158)

17
(9)

24
(18)

19
(12)

77

64

75

8

6

7

236
(184)

264
(213)

238
(193)

198
(155)

224
(184)

198
(164)

Total carrying amount

52

51

45

43

40

34

Work in progress

16

31

36

2

4

17

Total premises and equipment

225

729

240

54

51

59

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

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES37

NOTES TO THE FINANCIAL STATEMENTS (continued)
19. PREMISES AND EQUIPMENT (continued)
Unaudited
31/03/2007$mConsolidated
Unaudited
Audited31/03/2006 30/09/2006$m$m

Unaudited
31/03/2007$m

ParentUnaudited
31/03/2006$m

Audited30/09/2006$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 period
Additions
Transfers to subsidiary company
Depreciation

57
1	
–
(1)

58
–
–
(1)

58
–
–
(1)

–
–
–
–

3
–
(3)
–

3
–
(3)
–

Balance at end of the period

57

57

57

–

–

–

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

27
2
–
–
(3)
(3)

28
3
–
–
–
(3)

28
6
(1)
–
–
(6)

1	
–
–
–
–
–

21
–
(19)
(1)
–
–

21
–
–
(19)
–
(1)

Balance at end of the period

23

28

27

1	

1

1

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

–
–
–
–
–

484
80
–
(21)
(45)

484
176
(485)
(85)
(90)

–
–
–
–
–

–
–
–
–
–

–
–
–
–
–

Balance at end of the period

–

498

–

–

–

–

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

75
12
–
(3)
(7)

66
4
–
–
(6)

66
22
–
–
(13)

7
4
–
(1)
(2)

30
–
(22)
–
(2)

30
2
(22)
–
(3)

Balance at end of the period

77

64

75

8

6

7

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

45
18
(1)
(10)

56
6
–
(11)

56
14
(2)
(23)

34
18
(1)
(8)

45
5
–
(10)

45
10
(1)
(20)

Balance at end of the period

52

51

45

43

40

34

Work in progress
Balance at beginning of the period
Transfers to subsidiary company
Net (transfers) additions

36
–
(20)

26
–
5

26
–
10

17
–
(15)

15
(11)
–

15
(11)
13

Balance at end of the period

16

31

36

2

4

17

Total premises and equipment

225

729

240

54

51

59

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES38NOTES TO THE FINANCIAL STATEMENTS (continued)
20. GOODWILL AND OTHER INTANGIBLE ASSETS
Unaudited
31/03/2007$mConsolidated
Unaudited
Audited31/03/2006 30/09/2006$m$m

Unaudited
31/03/2007$m

ParentUnaudited
31/03/2006$m

Audited30/09/2006$m

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

3,265
–
–

3,263
–
–

3,263
3
(1)

3,217
–
–

3,217
–
–

3,217
–
–

Balance at end of the period

3,265

3,263

3,265

3,217

3,217

3,217

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

51	
8

41
4

41
10

50
7

41
4

41
9

Balance at end of the period

59

45

51

57

45

50

Accumulated amortisation
Balance at beginning of the period
Amortisation expense1

(32)
(3)

(25)
(4)

(25)
(7)

(32)
(3)

(25)
(4)

(25)
(7)

Balance at end of the period

(35)

(29)

(32)

(35)

(29)

(32)

Total software

24

16

19

22

16

18

Other intangible assets

4

4

4

4

4

4

3,293

3,283

3,288

3,243

3,237

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 six months
ended 31 March 2007 (31/03/2006 $nil; 30/09/2006 $nil).
1

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

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES39NOTES TO THE FINANCIAL STATEMENTS (continued)
21. DUE TO OTHER FINANCIAL INSTITUTIONS
Unaudited
31/03/2007$mConsolidated
Unaudited
Audited31/03/2006 30/09/2006$m$m

Unaudited
31/03/2007$m

ParentUnaudited
31/03/2006$m

Audited30/09/2006$m

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

2,106

1,502

1,082

–

–

–

233
1,839

1,189
1,245

1,362
1,543

233
1,508

1,189
1,168

1,362
1,466

Total due to other financial institutions

4,178

3,936

3,987

1,741	

2,357

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
2,106
1,502

1,082

–

–

–

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

22. DEPOSITS AND OTHER BORROWINGS
Amortised cost
Certificates of deposit
Term deposits
Demand deposits bearing interest
Deposits not bearing interest
Secured debenture stock
Secured deposits

5,190
26,231	
21,659
3,953
1,960
200

4,359
25,67817,369
4,078
2,119
200

3,941
26,293
19,856
3,919
2,077
200

5,190
26,231	
21,244
3,953
–
–

4,359
25,678
16,952
4,078
–
–

3,941
26,293
19,441
3,919––

Total deposits and other borrowings recognised atamortised cost

59,19353,80356,286

56,61851,06753,594

Fair value through the profit or loss
Commercial paper

5,565

7,913

6,890

–

–

–

Total deposits and other borrowings recognised at fair value

5,565

7,913

6,890

–

–

–

Total deposits and other borrowings

64,75861,716

63,176

56,61851,06753,594

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
5,570
7,919

6,894

–

–

–

UDC Finance Limited secured debentures
Registered secured debenture stock is constituted and securedby 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 and operating lease assets,of those companies. As at the date of these financial statements,
UDC Finance Limited is the only member of the Charging Group.
Until its disposal on 31 October 2006, Truck Leasing Limited
was also a member of the Charging Group.
Carrying value of total tangible assets
2,248

2,383

–

–

–

2,448

All changes in the fair value of commercial paper is attributable to changes in the benchmark interest rates (31/03/2006 all changes; 30/09/2006 allchanges).
The principal at maturity of commercial paper at fair value through the profit and loss is $5,645 million (31/03/2006 $8,007 million; 30/09/2006$6,995 million).

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES40NOTES TO THE FINANCIAL STATEMENTS (continued)
23. PAYABLES AND OTHER LIABILITIES
Unaudited
31/03/2007$mConsolidated
Unaudited
Audited31/03/2006 30/09/2006$m$m

Unaudited
31/03/2007$m

ParentUnaudited
31/03/2006$m

Audited30/09/2006
$m

57
609
15
131	
312
37
252

174
524
6
160
247
51
201

68
546
33
166
184
44
199

35
483
15
123
312
37
127

141
413
6
145
247
51
140

45
416
33
160
184
44
133

1,413

1,363

1,240

1,132

1,143

1,015

Provision for deferred income tax
Balance at beginning of the period
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 – discontinued operations
Charged (credited) directly to equity

210
–
–
–
42
–
10

150
21
(6)
–
33
–
(20)

150
21
(6)
(29)
60
8
6

202
–
–
–
44
–
10

120
21
(6)
–
28
–
(20)

120
21
(6)
–
61
–
6

Balance at end of the period

262

178

210

256

143

202

Deferred income tax liabilities comprisethe following temporary differences:
Lease finance
Share compensation
Defined benefit schemes
Other

104
8
5
145

101
5
1
71

90
4
2
114

98
8
5
145

66
5
1
71

82
4
2
114

Total deferred tax liabilities

262

178

210

256

143

202

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

14
4
3
21	

29
1
(1)
4

39
–
(1)
22

16
4
3
21	

24
1
(1)
4

40
–
(1)
22

Total deferred tax charged to the income
statement – continuing operations

42

33

60

44

28

61

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

10

(20)

6

10

(20)

6

Total deferred tax charged (credited) directly to equity

10

(20)

6

10

(20)

6

Creditors
Accrued interest and unearned discounts
Share-based payments liability
Accrued charges
Security settlements
Equitable assignment of mortgages
Other liabilities
Total payables and other liabilities

24. DEFERRED TAX LIABILITIESANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES41

NOTES TO THE FINANCIAL STATEMENTS (continued)
25. PROVISIONS
Unaudited
31/03/2007$m
Non-lending losses, frauds and forgeries

Consolidated
Unaudited
Audited31/03/2006 30/09/2006$m$m

Unaudited
31/03/2007$m

ParentUnaudited
31/03/2006$m

Audited30/09/2006
$m

3

13

4

3

13

4

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

107
28
(29)
–

109
27
(30)
–

109
52
(53)
(1)

106
28
(29)
–

107
27
(30)
–

107
50
(51)
–

Balance at end of the period

106

106

107

105

104

106

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

9
–
(3)
–

6
8
(2)
(1)

6
8
(4)
(1)

9
–
(3)
–

6
8
(2)
(1)

6
8
(4)
(1)

Balance at end of the period

6

11

9

6

11

9

Redundant assets restructuring costs (Note 2)
Balance at beginning of the period
New provisions
Transfers from subsidiary company
Provisions utilised
Unused amounts reversed

5
–
–
(2)
–

16
–
–
(1)
(6)

16
1
–
(4)
(8)

2
–
1	
(1)
–

13
–
–
(1)
(6)

13
1
–
(3)
(9)

Balance at end of the period

3

9

5

2

6

2

Other provisions

26

10

10

11	

10

10

Total provisions

144

149

135

127

144

131

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 31 March 2007 are expected to
be settled over the 2007 financial year, with the exception that provisions for losses arising from rental commitments on leased premises which havebecome vacant as a result of restructuring will be settled over the remaining term of the leases.

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES42NOTES TO THE FINANCIAL STATEMENTS (continued)
26. BONDS AND NOTES

Issued by ANZ National Bank Limited
Denomination Face value
Maturity
Interest rate %USD
300m
floating rate bond
2006
LIBOR + 0.05%
NZD
150m
fixed rate notes
2009
6.82%
NZD
150m
fixed rate notes
2011
6.80%
Other bonds and notes1									Issued by ANZ National (Int’l) Limited
Denomination Face value
Maturity
Interest rate %HKD
156m
floating rate notes
2006
3 month HIBOR + 0.1125%
HKD
234m
fixed rate notes
2006
4.95%
USD
10m
fixed rate notes
2006
4.045%
USD
50m
floating rate notes
2006
3 month LIBOR – 0.11%
GBP
100m
floating rate notes
2007
3 month GBP LIBOR – 0.03%
22007
3 month LIBOR – 0.01%
GBP
250m
floating rate notes
USD
100m
floating rate notes
2007
3 month LIBOR – 0.10%EUR
25m
floating rate notes
2007
3 month EURIBOR – 0.08%
EUR
100m
floating rate notes
2008
3 month EURIBOR + 0.02%
GBP
300m
floating rate notes
2008
3 month GBP LIBOR + 0.01%
HKD
80m
fixed rate notes
2008
3.93%
NZD
150m
fixed rate notes
2008
6.50%
3
2008
4.25%
USD
27m
fixed rate notes
USD
120m
floating rate notes
2008
3 month LIBOR – 0.06%
USD
250m
fixed rate notes
2008
4.265%
USD
750m
floating rate notes
2008
3 month LIBOR + 0.07%
GBP
40m
floating rate notes
2008
3 month GBP LIBOR – 0.065%
JPY
9,000m floating rate notes
2008
3 month JPY LIBOR
EUR
750m
floating rate notes
2009
3 month EURIBOR + 0.12%
HKD
1,000m fixed rate notes
2009
4.40%
NZD
150m
floating rate notes
2009
3 month BKBM + 0.10%HKD
300m
fixed rate notes
2009
4.93%
HKD
280m
fixed rate notes
2009
4.44%
USD
750m
floating rate notes
2009
3 month LIBOR + 0.04%
USD
250m
floating rate notes
2009
3 month Prime – 2.9125%
USD
300m
floating rate notes
2009
1 month LIBOR + 0.04%
NZD
20m
floating rate notes
2009
3 month BKBM + 0.05%
42010
3 month HIBOR + 0.46%HKD
130m
floating rate notes
52010
6 month HIBOR + 0.60%
HKD
150m
floating rate notes
62010
6 month HIBOR + 0.60%
HKD
190m
floating rate notes
72010
6 month HIBOR + 0.60%HKD
200m
floating rate notes
82010
3 month HIBOR + 0.405%
HKD
200m
floating rate notes
USD
750m
floating rate notes2010
3 month LIBOR + 0.11%
2010
1 month LIBOR
USD
1,500m floating rate notes9
NZD
100m
floating rate notes2010
3 month BKBM + 0.05%
2011
5.182%
USD
75m
fixed rate notes10
USD
300m
fixed rate notes
2011
5.50%
GBP
350m
floating rate notes
2011
3 month LIBOR + 0.05%
2011
5.10%
HKD
200m
fixed rate notes11
12
2011
4.90%
HKD
200m
fixed rate notes					Issued by NBNZ Holdings Limited
Maturity
Interest rate %Denomination Face value
3 month BKBM
NZD
480m
floating rate notes13 2008
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)

Unaudited
31/03/2007$mConsolidated
Unaudited
Audited31/03/2006 30/09/2006$m$m

Unaudited
31/03/2007$m

ParentUnaudited
Audited31/03/2006 30/09/2006
$m
$m

–
150
150
209
509

490
150
150
145
935

–
150
150
175
475

–
150
150
209
509

490
150
150
145
935

–
150
150
175
475

–
–
–
–
–
688
140
47
187
825
14
150
38
168
350
1,050
110
107
1,401
179
150
54
50
1,050
350
420
20
–
27
34
36
–
1,050
2,101
100
–
420
963
36
36
12,351

33
49
16
82
285
713
–
–
199
855
17
150
44
–
408
1,225
–
–
1,490
211
150
–
–
–
–
–
–
27
32
40
42
42
1,225
2,450
–
123
–
–
–
–
9,908

–
46
–
–
288
719
153
49
195
863
16
150
41
–
383
1,149
115
117
1,461
197
150
59
–
1,150
–
–
20
26
30
37
39
39
1,149
2,297
–
115
460
–
–
–
11,513

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

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

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

480

480

480

–

–

–

13,34011,323

12,468

509

935

475

688

713

719

–

–

–

Other bonds and notes includes index linked notes, equity linked notes and other fixed rate and fixed term bonds.
These notes were issued to Australia and New Zealand Banking Group Limited.
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 toredeem 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 the note 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 isa 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 notes on every semiannual 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 Year 1, there isa 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 the 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.
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, 4 and 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, 4 and 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.
1
2
3

Bonds and notes issued by ANZ National (Int’l) Limited are guaranteed by the Bank.

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES43NOTES TO THE FINANCIAL STATEMENTS (continued)
27. RELATED PARTY FUNDING
Unaudited
31/03/2007
$m
2,764

ANZ Holdings (New Zealand) Limited (Parent Company)

Consolidated
Unaudited
Audited31/03/2006 30/09/2006
$m
$m
2,643

2,720

Unaudited
31/03/2007$m

ParentUnaudited
31/03/2006$m

Audited30/09/2006
$m

2,764

2,643

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 17
September 2007 and 15 December 2007 respectively.
28. LOAN CAPITAL
Unaudited
31/03/2007$mConsolidated
Unaudited
Audited31/03/2006 30/09/2006$m$m

Unaudited
31/03/2007$m

ParentUnaudited
31/03/2006$m

Audited30/09/2006$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
NZD term subordinated fixed rate bonds

234
301	
211	
50
1,243

243
311
218
–
750

238
304
213
50
1,000

234
301	
211	
50
1,243

243
311
218
–
750

238
304
213
50
1,000

Total loan capital

2,039

1,522

1,805

2,039

1,522

1,805

Included within loan capital is the following related party balance:
Australia and New Zealand Banking Group Limited(Ultimate Parent Company)
796
772
805
796
772
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 Februaryand 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.
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 date23 July 2002
300
7.05%
23 July 2007
23 July 201215 September 2006
350
7.16%
15 September 201115 September 2016
2 March 2007
250
7.60%
2 March 2012
2 March 2017
The Bank may elect to redeem the bonds on their call date. If the bonds are not called they will continue to pay interest to maturity at the five
year interest rate swap rate plus 0.80% p.a., 0.75% p.a. and 0.76% p.a. for the $300 million, $350 million and $250 million bonds, respectively.
Interest is payable half yearly in arrears based on the fixed coupon rate.
As at 31 March 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
15 March 2002
125
7.61%
16 April 2007
16 April 201215 July 2002
125
7.40%
17 September 2007
17 September 2012
20 February 2003
100
6.46%
20 August 2008
20 August 2013
The Bank may elect to redeem the bonds on their call date. If the bonds are not called they will continue to pay interest to maturity at the five
year interest rate swap rate plus 1.00% p.a., apart from the 20 August 2013 bonds, which 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%.
As at 31 March 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 COMPANIES44NOTES TO THE FINANCIAL STATEMENTS (continued)
29. ORDINARY SHARE CAPITAL
Unaudited
31/03/2007
IssuedSharesOrdinary shares at beginning and end of the period

Consolidated
Unaudited
Audited31/03/2006 30/09/2006
IssuedIssuedSharesShares

700,755,498 700,755,498 700,755,498

Unaudited
31/03/2007
$m
5,943

Ordinary share capital at beginning and end of the period

Consolidated
Unaudited
Audited31/03/2006 30/09/2006
$m
$m
5,943

5,943

Unaudited
31/03/2007
IssuedSharesParentUnaudited
Audited31/03/2006 30/09/2006
IssuedIssuedShares Issued Shares

700,755,498 700,755,498 700,755,498

Unaudited
31/03/2007$m

ParentUnaudited
31/03/2006$m

Audited30/09/2006
$m

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 period 650,712 ordinary shares wereuncalled (31/03/2006 650,712 shares; 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
Unaudited
Unaudited
Audited
6 months to 6 months toYear to31/03/2007 31/03/2006 30/09/2006
$m
$m
$m

ParentUnaudited
Unaudited
6 months to 6 months to
31/03/2007 31/03/2006$m$m

AuditedYear to30/09/2006$m

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

3
–
–

n/a
–
–

n/a
–
3

3
–
–

n/a
–
–

n/a
–
3

(3)

–

–

(3)

–

–

Balance at end of the period

–

–

3

–

–

3

Cash flow hedging reserve
Balance at beginning of the period
Adjustment on adoption of NZ IAS 39 on 1 October 2005
Valuation gain recognised after tax

52
–
21	

n/a
40
(40)

n/a
40
12

52
–
21	

n/a
40
(40)

n/a
40
12

Balance at end of the period

73

–

52

73

–

52

Total reserves

73

–

55

73

–

55

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

2,235
–
635

2,003
61
520

2,003
61
1,072

651	
–
425

851
90
287

851
90
611

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

2,870
6
–

2,584
(1)
–

3,136
(1)
(900)

1,076
6
–

1,228
(1)
–

1,552
(1)
(900)

Balance at end of the period

2,876

2,583

2,235

1,082

1,227

651

A dividend of $400 million was declared on 13 April 2006 and paid on 5 May 2006. A dividend of $500 million was declared on 10 August 2006
and paid on 15 September 2006.
A dividend of $360 million was declared on 12 April 2007.
The declared dividend on ordinary shares was $0.51 per share (31/03/2006 $0.57 per share; 30/09/2006 $1.28 per share).

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES45NOTES TO THE FINANCIAL STATEMENTS (continued)
31. CAPITAL ADEQUACY

Capital Adequacy Ratios
Tier 1 Capital
Total Capital
Reserve Bank of New Zealand minimum ratios:Tier 1 Capital
Total Capital

Unaudited
31/03/2007

Consolidated
Unaudited
Audited31/03/2006 30/09/2006

Registered Bank
Unaudited
Unaudited
Audited31/03/2007 31/03/2006 30/09/2006

7.98%
11.03%

8.24%
10.70%

7.34%
10.14%

7.68%
9.82%

8.06%
9.54%

7.09%
8.96%

4.00%
8.00%

4.00%
8.00%

4.00%
8.00%

4.00%
8.00%

4.00%
8.00%

4.00%
8.00%

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.
Unaudited
31/03/2007$mConsolidated
Unaudited
Audited31/03/2006 30/09/2006$m$m

Registered Bank
Unaudited
Unaudited
Audited31/03/2007 31/03/2006 30/09/2006
$m
$m
$m

Tier 1 Capital
Ordinary share capital
Revenue and similar reserves
Current period’s profit after tax

5,943
2,314
635

5,943
2,063
520

5,943
1,218
1,072

5,943
2,003
618

5,943
1,823
484

5,943
979
1,001

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

3,265
28
14
177
73

3,263
20
–
157
–

3,266
23
–
167
52

3,262
26
14
177
73

3,262
20
–
157
–

3,262
22
–
167
52

Total Tier 1 Capital

5,335

5,086

4,725

5,012

4,811

4,420

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

301	

311

304

301	

311

304

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

1,738

1,211

1,501

1,738

1,211

1,501

Total Tier 2 Capital

2,039

1,522

1,805

2,039

1,522

1,805

Total Tier 1 Capital Plus Tier 2 Capital

7,374

6,608

6,530

7,051	

6,333

6,225

–

–

–

642

637

642

Capital

7,374

6,608

6,530

6,409

5,696

5,583

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

61,726
5,140

57,321
4,410

60,1604,223

60,144
5,123

55,312
4,391

58,137
4,185

66,866

61,73164,38365,26759,70362,322Less deductions from Total Capital– Equity investments in subsidiaries

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 31 March 2007 (Unaudited):
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

4,981	
0
657
10
4,385
20
422
20
46,39950
37,499	100
6,615
n/a

–
66
877
84
23,20037,499–Total on-balance sheet exposures

100,958

61,726On-balance sheet exposures

Off-balance sheet exposures

Notional
Principal
Amount$m

CreditConversion
Factor%CreditEquivalent
Amount$m

Average
Risk
Weight%Risk
Weighted$m2,177	100
2,177
45
2,391	100
2,391	
63371	
50	185	100
150
20
30
71

984
1,499
185
21

2,013

50	1,007	100

1,007

18,0890

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

73,209		
360,243		
20

3,138
2,742
21	

27
22
20

844
596
4

Total off-balance sheet exposures

458,663

11,691		

5,140

1

–	100

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

–

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES47

NOTES TO THE FINANCIAL STATEMENTS (continued)
31. CAPITAL ADEQUACY (continued)
Total Risk Weighted Exposures of the Banking Group as at 31 March 2006 (Unaudited):
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

2,053
1,004
7,342
391
41,07235,139
7,293

0
10
20
20
50
100
n/a

–
100
1,468
78
20,53635,139–Total on-balance sheet exposures

94,294		

57,321On-balance sheet exposures

Off-balance sheet exposures

Notional
Principal
Amount$m

CreditConversion
Factor%CreditEquivalent
Amount$m

Average
Risk
Weight%Risk
Weighted
$m

1,890
1,353
328
279

100
100
50
20

1,890
1,353
164
56

44
73
100
84

828
986
164
47

1,429

50

715

100

715

17,469Direct 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

–

74,594		
192,537		
30		

5,009
1,264
22

27
25
20

1,354
312
4

Total off-balance sheet exposures

289,909		

10,473		

4,410

1

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

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES48

NOTES TO THE FINANCIAL STATEMENTS (continued)
31. CAPITAL ADEQUACY (continued)
Total Risk Weighted Exposures of the Banking Group as at 30 September 2006 (Audited):
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
5,506

0
10
20
20
50
100
n/a

–
82
1,296
85
21,76336,934–

Total on-balance sheet exposures

96,024		

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 COMPANIES49

NOTES TO THE FINANCIAL STATEMENTS (continued)
31. CAPITAL ADEQUACY (continued)
Total Risk Weighted Exposures of the Registered Bank as at 31 March 2007 (Unaudited):
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

4,681	
0
657
10
3,878
20
422
20
46,39950
36,018	100
7,252
n/a

–
66
776
84
23,20036,018–

Total on-balance sheet exposures

99,307		

60,144On-balance sheet exposures

Off-balance sheet exposures

Notional
Principal
Amount$m

CreditConversion
Factor%CreditEquivalent
Amount$m

Average
Risk
Weight%Risk
Weighted$m2,177	100
2,177
45
984
2,391	100
2,391	
63	1,499371	
50	185	100	185
148
20
30
72
21

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

73,209		
359,826		
20

3,138
2,741	
21	

27
22
20

844
596
4

Total off-balance sheet exposures

458,039

11,673		

5,123

1

1,980

50

990	100

990

17,917

0

–	100

–

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

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES50NOTES TO THE FINANCIAL STATEMENTS (continued)
31. CAPITAL ADEQUACY (continued)
Total Risk Weighted Exposures of the Registered Bank as at 31 March 2006 (Unaudited):
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

1,753
1,004
6,786
391
41,04033,257
7,929

0
10
20
20
50
100
n/a

–
100
1,357
78
20,52033,257–

Total on-balance sheet exposures

92,160		

55,312On-balance sheet exposures

Off-balance sheet exposures

Notional
Principal
Amount$m

CreditConversion
Factor%CreditEquivalent
Amount$m

Average
Risk
Weight%Risk
Weighted
$m

1,890
1,334
328
277

100
100
50
20

1,890
1,334
164
55

44
73
100
85

828
967
164
47

1,429

50

715

100

715

17,000

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

–

74,591		
191,771		
30		

5,009
1,264
22

27
25
20

1,354
312
4

Total off-balance sheet exposures

288,650		

10,453		

4,391

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

1

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES51

NOTES TO THE FINANCIAL STATEMENTS (continued)
31. CAPITAL ADEQUACY (continued)
Total Risk Weighted Exposures of the Registered Bank as at 30 September 2006 (Audited):
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
6,143

0
10
20
20
50
100
n/a

–
82
1,190
85
21,76335,017–

Total on-balance sheet exposures

93,913		

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		
252,713		
30		

2,840
1,665
22

26
23
20

745
377
4

Total off-balance sheet exposures349,655		

9,184		

4,185

1

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

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES52

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 highquality 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 exposuresinvolve not just on-balance sheet loans and advances; the Banking Group also enters into guarantees and other commitments such as letters of credit andperformance, and other bonds.
The Banking Group also trades in financial instruments where it takes positions in traded and over-the-counter instruments, including derivatives, to takeadvantage of short-term market movements in equities and bonds and in currency and interest rate prices. The Board places trading limits on the levelof exposure that can be taken in relation to both overnight and intra-day market positions. With the exception of specific hedging arrangements, foreignexchange and interest rate exposures associated with these derivatives are normally offset by entering into counterbalancing positions, thereby controllingthe 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, or groups ofborrowers, 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 andpersonal 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 both amountand 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 to express the volume
of instruments outstanding. This credit risk exposure is managed as part of the overall lending limits with customers, together with potential exposures frommarket movements. Collateral or other security is not usually obtained for credit risk exposures on these instruments, except where the Banking Grouprequires 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 collateralised by
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 tocredit 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 specificcredit standards. The Banking Group monitors the term to maturity of credit commitments because longer-term commitments generally have a greater degreeof credit risk than shorter-term commitments.
Foreign Currency Related Risk
The risk related to mismatching of non-traded foreign currency assets and liabilities is presented in Note 37 Foreign Currency Risk.

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES53NOTES 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.

Consolidated

Unaudited 31/03/2007
Carrying
Fair
AmountValue$m$m

Unaudited 31/03/2006
Carrying
Fair
AmountValue$m$m

Audited 30/09/2006
Carrying
Fair
AmountValue$m$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

5,741	
5,741	
3,067
3,067
1,917	1,917
3,041	
3,041	
45
45
82,25881,807
714
714

1,997
7,110
1,652
3,648
556
74,176
559

1,997
7,110
1,652
3,648
556
73,744
559

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

2,698
5,617
1,596
2,020
359
77,878823

Total financial assets

96,783

96,332

89,69889,266

91,26890,991

Financial 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

4,178
4,177
64,75864,713
3,168
3,168
1,190	1,190
13,340	13,341	
2,764
2,764
2,039
2,034

3,936
61,716
2,927
1,120
11,323
2,643
1,522

3,940
61,693
2,927
1,120
11,326
2,643
1,522

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

91,437

91,38785,187

85,171

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

5,740
5,740
2,580
2,580
1,916	1,916
3,066
3,066
35
35
78,57078,123
1,543	1,543
606
606

1,997
6,510
1,652
3,648
546
70,462
1,577
464

1,997
6,510
1,652
3,648
546
70,074
1,577
464

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

2,698
5,111
1,596
2,019
349
74,192
1,505
737

Total financial assets

94,056

93,60986,85686,46888,46888,207

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

1,741	1,741	
56,61856,57830,18530,185
3,165
3,165
924
924
509
509
2,764
2,764
2,039
2,034

2,357
51,067
29,347
2,916
920
935
2,643
1,522

2,357
51,04629,354
2,916
920
937
2,643
1,522

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

97,94591,707

91,695

92,81792,808

Parent97,900ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES54

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
based on present value estimates or other valuation techniques. For the majority of short-term financial instruments, defined as those which repriceor 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, and changes in underlying assumptions could significantly affect these estimates. Furthermore, market prices or rates of discount are notavailable for many of the financial instruments valued and surrogates have been used which may not reflect the price that would apply in an actualsale.
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 forsecurities 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 ofeach 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
been 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
with doubt as to collection, expected cash flows (inclusive of the value of security) are discounted using a rate which includes a premium for theuncertainty of 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
fair value is not adjusted for any value expected to be derived from retaining the deposit for a future period of time.
For interest bearing fixed maturity deposits and other borrowings without quoted market prices, market borrowing rates of interest for debt with asimilar 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 COMPANIES55

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 or expectedmaturity, where known, as at balance date. 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 experiencehas shown such balances to provide a stable source of long term funding for the Banking Group. When managing liquidity risks, the Banking Groupadjusts this contractual profile for expected customer behaviour.

Consolidated – 31/03/2007 (Unaudited):

Total
Carrying
Value$mLess Than
3 Months$m

3-12	1-5
MonthsYears$m$m

Beyond No Specified
5 Years
Maturity$m$m

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

5,741	
5,728	13–
3,067
2,581	–
200
1,917	1,490
94	107
3,041	
–
–
–
45
32
–	13
82,2589,230
9,051	
22,086
4,889
–
–
–

–
286
226
–
–
42,229
–

–
–
–
3,041
–
(338)
4,889

Total assets

100,958	19,061	

42,741	

7,592

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

4,178
2,885
816
48
64,75848,713	13,734
2,311	
3,168
–
–
–
1,819
261	11	
–13,340	148	1,186	12,006
2,764
2,764
–
–
2,039	118425	1,195

429
–
–
–
–
3,168
–	1,547
–
–
–
–
301	
–

Total liabilities

92,06654,889	16,172	15,560

730

4,715

Net liquidity gap
Net liquidity gap – cumulative

8,892
8,892

(35,828)(35,828)(7,014)(42,842)6,846(35,996)

42,011	
6,015

2,877
8,892

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

1,997
7,110
1,652
3,648
556
74,176
5,155

1,997
6,122
1,289
–
342
10,954
–

–
737
148
–
181
3,824
–

–
251
162
–
33
21,705
–

–
–
53
–
–
37,979
–

–
–
–
3,648
–
(286)
5,155

Total assets

94,29420,7044,890

22,151

38,032

8,517

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

3,936
61,716
2,927
1,701
11,323
2,643
1,522

3,407
45,613
–
133
622
2,643
100

512
13,370
–
–
350
–
–

15
1,583
–
–
10,351
–
1,118

2
1,150
–
–
–
–
304

–
–
2,927
1,568
–
–
–

Total liabilities

85,76852,518

14,232

13,067

1,456

4,495

Net liquidity gap
Net liquidity gap – cumulative

8,526
8,526

(31,814)(31,814)(9,342)(41,156)

9,084(32,072)

36,576
4,504

4,022
8,526

9,158

22,406

Consolidated – 31/03/2006 (Unaudited):

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES56

NOTES TO THE FINANCIAL STATEMENTS (continued)
34. MATURITY ANALYSIS OF ASSETS AND LIABILITIES (continued)

Consolidated – 30/09/2006 (Audited):

Total					Carrying
Less Than
3-12
1-5
BeyondValue
3 Months
MonthsYears
5 Years
$m
$m
$m
$m
$m

No
SpecifiedMaturity$m

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
5,579

2,677
5,010
1,239
–
313
10,537
535

21
378
211
–
–
7,942
–

–
229
51
–
42
20,621
–

–
–
95
–
–
39,364
–

–
–
–
2,020
4
(309)
5,044

Total assets

96,024

20,311

8,552

20,94339,4596,759

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
1,638
12,468
2,720
1,805

3,987
47,095
–
53
111
2,720
–

–
13,186
–
–
725
–
550

–
2,895
–
–
11,632
–
951

–
–
–
–
–
–
304

–
–
1,997
1,585
–
–
–

Total liabilities

87,79153,966

14,461

15,478304

3,582

Net liquidity gap
Net liquidity gap – cumulative

8,233
8,233

(33,655)(33,655)(5,909)(39,564)

5,465(34,099)

39,155
5,056

3,177
8,233

Parent – 31/03/2007 (Unaudited):
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

5,740
5,727	13
–
–
–
2,580
2,580
–
–
–
–
1,916	1,489
94	107
226
–
3,066
–
–
–
–
3,066
35
32
–
3
–
–
78,5708,930
8,498	19,253
42,206
(317)
1,543
609
5
758	171	
–
12,184––––	12,184

Total assets

105,634	19,367

20,121	

42,603	14,933

Liabilities
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

1,741	1,598–
48
56,61844,931	
9,941	1,746
30,185	13,517
5,500	11,168
3,165
–
–
–
1,515
261	11	
–509	10
70
429
2,764
2,764
–
–
2,039	118425	1,195

95
–
–
–
–
–
–
3,165
–	1,243
–
–
–
–
301	
–

Total liabilities

98,536

63,199	15,947	14,586

396

Net liquidity gap
Net liquidity gap – cumulative

7,098
7,098

(43,832)(43,832)

8,610(7,337)(51,169)

5,535(45,634)

4,408

42,207	10,525(3,427)
7,098

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES57

NOTES TO THE FINANCIAL STATEMENTS (continued)
34. MATURITY ANALYSIS OF ASSETS AND LIABILITIES (continued)

Parent – 31/03/2006 (Unaudited):

Total					Carrying
Less Than
3-12
1-5
BeyondValue
3 Months
MonthsYears
5 Years
$m
$m
$m
$m
$m

No
SpecifiedMaturity$m

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

1,997
6,510
1,652
3,648
546
70,462
1,577
12,995

1,997
6,112
1,289
–
342
10,794
47
–

–
398
148
–
181
3,364
589
–

–
–
162
–
23
19,145
941
–

–
–
53
–
–
37,417
–
–

–
–
–
3,648
–
(258)
–
12,995

Total assets

99,387

20,581

4,680

20,27137,47016,385

Liabilities
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

2,357
51,067
29,347
2,916
1,430
935
2,643
1,522

2,337
38,634
7,067
–
133
507
2,643
100

3
10,120
7,125
–
–
–
–
–

15
1,163
13,901
–
–
428
–
1,118

2
1,150
1,254
–
–
–
–
304

–
–
–
2,916
1,297
–
–
–

Total liabilities

92,21751,421

17,248

16,625

2,710

4,213

Net liquidity gap
Net liquidity gap – cumulative

7,170
7,170

(30,840)(30,840)(12,568)(43,408)

3,646(39,762)

34,760(5,002)

12,172
7,170

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
12,328

2,677
4,728
1,239
–
313
10,318
691
–

21
378
211
–
–
7,483
5
–

–
5
51
–
32
17,594
809
–

–
–
95
–
–
39,344
–
–

–
–
–
2,019
4
(286)
–
12,328

Total assets

100,059

19,966

8,098

18,491

39,43914,065

Liabilities
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
1,348
475
2,720
1,805

2,828
41,532
13,580
–
–
–
2,720
–

–
9,340
3,376
–
–
10
–
550

–
2,722
11,692
–
–
465
–
951

–
–
–
–
–
–
–
304

–
–
–
1,992
1,348
–
–
–

Total liabilities

93,41060,66013,276

15,830304

3,340

Net liquidity gap
Net liquidity gap – cumulative

6,649
6,649

(40,694)(40,694)(5,178)(45,872)

2,661(43,211)

39,135(4,076)

10,725
6,649

Parent – 30/09/2006 (Audited):

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES58NOTES TO THE FINANCIAL STATEMENTS (continued)
35. INTEREST SENSITIVITY GAP AND WEIGHTED AVERAGE INTEREST RATESThe following tables represent 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.
At Call Or
Less Than
3 Months$m

3-6
Months$m

AssetsLiquid assets
7.25%
5,741	
5,482
Due from other financial institutions 6.64%
3,067
2,567
Trading securities
7.53%	1,917	1,591	
Derivative financial instruments
n/a
3,041	–
Available-for-sale assets
13.01%
45
32
Net loans and advances
9.08%
82,25832,963
Other financial assets
n/a
714
–

6
–
79
–
–
4,983
–

8
–
–
–
200
–
3
43
201	
–
–
–
–	13
–
6,241	
38,280	129
–
–
–

245
300
–
3,041
–
(338)
714

Consolidated – Unaudited
31/03/2007

Weighted
Effective
Interest
Rate

Total
CarryingValue$m6-12	1-5
MonthsYears$m$m

Beyond Not Bearing
5 Years
Interest$m$m

96,783
4,175

42,635
–

5,068
–

6,252
–

38,536
–

330
–

3,962
4,175

	100,958

42,635

5,068

6,252

38,536330

8,137

Liabilities
Due to other financial institutions
6.35%
4,178
2,535	175641	48
Deposits and other borrowings
6.44%
64,75843,816
7,423
6,142
3,424
Derivative financial instruments
n/a
3,168
–
–
–
–
Payables and other financial liabilities
n/a	1,190
261	11	
––Bonds and notes
7.83%	13,340	11,340
350	150	1,500
Related party funding
7.50%
2,764
2,764
–
–
–
Loan capital
7.90%
2,039
329	1,010
–
700

429
–
–
60
–
–
–

350
3,953
3,168
858
–
–
–
8,329
629
8,892

Total financial assets
Non-financial assets
Total assets

n/a

91,437629
8,892

61,045
–
–

8,969
–
–

6,933
–
–

5,672
–
–

489
–
–

	100,958

61,045

8,969

6,933

5,672

489	17,850

On-balance sheet interest sensitivity gap
Hedging instruments
n/a

–
–

(18,410)
22,438(3,901)
5,988

(681)
3,680

32,864(32,872)

(159)
766

(9,713)–

Interest sensitivity gap – net
Interest sensitivity gap – cumulative

–
–

4,028
4,028

2,087
6,115

2,999
9,114

(8)
9,106

607
9,713

(9,713)–

Total financial liabilities
Non-financial liabilities
Equityn/an/aTotal liabilities and equity

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES59NOTES TO THE FINANCIAL STATEMENTS (continued)
35. INTEREST SENSITIVITY GAP AND WEIGHTED AVERAGE INTEREST RATES (continued)
Weighted
Effective
Interest
Rate

Total
Carrying
Value$m

At Call Or
Less Than
3 Months$m

3-6
Months$m

6-12Months
$m

1-5
Years
$m

6.50%

1,997

1,789

–

–

–

–

208

7.08%
7.27%
n/a
6.69%
8.78%
n/a

7,110
1,652
3,648
556
74,176
559

5,916
1,289
–
355
32,253
–

520
134
–
113
4,421
–

217
14
–
68
10,139
–

251
162
–
20
26,944
–

–
53
–
–
705
–

206
–
3,648
–
(286)
559

Total financial assets		
Non-financial assets
n/a

89,6984,596

41,602–

5,188–

10,438–27,377
–

758
–

4,335
4,596

Total assets		

94,29441,602

5,188

10,43827,377

758

8,931

6.03%
6.01%
n/a

3,936
61,716
2,927

3,282
40,190
–

509
9,165
–

–
4,750
–

–
2,383
–

–
1,150
–

145
4,078
2,927

n/a
7.54%
7.25%
7.92%

1,120
11,323
2,643
1,522

133
9,910
2,643
318

–
16
–
554

–
49
–
–

–
1,348
–
650

–
–
–
–

987
–
–
–

n/a
n/a

85,187581
8,526

56,476––

10,244
–
–

4,799
–
–

4,381
–
–

1,150
–
–

8,137
581
8,526

Total liabilities and equity		

94,29456,476

10,244

4,799

4,381

1,150

17,244On-balance sheet interest sensitivity gap		
Hedging instruments
n/a

–
–

(14,874)
25,643(5,056)
5,167

5,639
(14,437)

22,996(16,291)

(392)
(82)

(8,313)–

Interest sensitivity gap – net
Interest sensitivity gap – cumulative		––

10,76910,769111
10,880(8,798)
2,082

6,705
8,787

(474)
8,313

(8,313)–

Consolidated – Unaudited
31/03/2006
AssetsLiquid assets
Due from other financial
institutions
Trading securities
Derivative financial instruments
Available-for-sale assets
Net loans and advances
Other financial assets

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
Total financial liabilities
Non-financial liabilities
EquityBeyond Not Bearing
5 Years
Interest$m$m

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES60NOTES TO THE FINANCIAL STATEMENTS (continued)
35. INTEREST SENSITIVITY GAP AND WEIGHTED AVERAGE INTEREST RATES (continued)
Weighted
Effective
Interest
Rate

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%

2,698

2,384

13

8

–

–

293

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

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

5,021
1,245
–
342
32,359
–

320
209
–
–
4,822
–

8
1
–
–
9,736
–

229
46
–
13
31,399
–

–
95
–
–
148
–

39
–
2,020
4
(309)
823

Total financial assets		
Non-financial assets
n/a

91,2684,756

41,351
–

5,364
–

9,753
–

31,687
–

243
–

2,870
4,756

Total assets		

96,02441,351

5,364

9,753

31,687

243

7,626

5.86%
6.20%
n/a

3,987
63,176
1,997

3,906
41,973
–

–
7,540
–

–
5,845
–

–
3,899
–

–
–
–

81
3,919
1,997

n/a
7.60%
7.25%
7.88%

965
12,468
2,720
1,805

5
10,681
2,720
213

10
115
–
592

–
41
–
550

32
1,631
–
450

90
–
–
–

828
–
–
–

Total financial liabilities		

87,11859,498

8,257

6,436

6,012

90

6,825

Non-financial liabilities
Equity

n/a
n/a

673
8,233

–
–

–
–

–
–

–
–

–
–

673
8,233

Total liabilities and equity		

96,02459,498

8,257

6,436

6,012

90

15,731On-balance sheet interest sensitivity gap		
Hedging instruments––(18,147)
24,662(2,893)
1,627

3,317
(2,901)

25,675(23,568)153
180(8,105)–Interest sensitivity gap – net		
Interest sensitivity gap – cumulative		

–
–

6,515
6,515

(1,266)
5,249

416
5,665

2,107
7,772

333
8,105

(8,105)–

Consolidated – Audited
30/09/2006
AssetsLiquid assets
Due from other financial
institutions
Trading securities
Derivative financial instruments
Available-for-sale assets
Net loans and advances
Other financial assets

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

Beyond Not Bearing
5 Years
Interest$m$m

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES61

NOTES TO THE FINANCIAL STATEMENTS (continued)
35. INTEREST SENSITIVITY GAP AND WEIGHTED AVERAGE INTEREST RATES (continued)
At Call Or
Less Than
3 Months$m

3-6
Months$m

AssetsLiquid assets
7.25%
5,740
5,481	
Due from other financial institutions 6.51%
2,580
2,280
Trading securities
7.53%	1,916	1,590
Derivative financial instruments
n/a
3,066
–
Available-for-sale assets
14.61%
35
32
Net loans and advances
9.09%
78,57032,288Due from subsidiary companies
4.18%	1,543
243
Other financial assets
n/a
606
–

6
–
79
–
–
4,821	
–
–

8
–
3
–
–
5,929
–
–

–
–
–
–
43
201	
–
–
3
–
35,735	114
476	171	
––

Parent – Unaudited
31/03/2007

Weighted
Effective
Interest
Rate

Total financial assets
Non-financial assets
Total assets
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

Total
Carrying
Value
$m

245
300
–
3,066
–
(317)
653
606

41,914
–

4,906
–

5,940
–

36,257–486
4,553–	11,578

	105,634

41,914

4,906

5,940

36,257486	16,131

5.10%	1,741	1,245
6.36%
56,61840,036
7.73%
30,18523,397
n/a
3,165
–

–
5,010
2,575
–

–
48
4,760
2,859
2,457	1,756
–
–

924
509
2,764
2,039

261	11	
209
–
2,764
–
329	1,010

n/an/a

97,945591	
7,098

68,241	
––	105,634

On-balance sheet interest sensitivity gap
Hedging instrumentsn/aInterest sensitivity gap – net
Interest sensitivity gap – cumulative

Total liabilities and equity

Beyond Not Bearing
5 Years
Interest$m$m

94,056n/a	11,578

n/a
7.05%
7.50%
7.90%

Total financial liabilities
Non-financial liabilities
Equity6-12	1-5
Months
Years
$m
$m

95
–
–
–

353
3,953
–
3,165

–
–
–
–

–
300
–
700

–
–
–
–

652
–
–
–

8,606
–
–

7,217
–
–

5,663
–
–

95
–
–

8,123
591
7,098

68,241	

8,606

7,217

5,663

95	15,812––(26,327)
22,843(3,700)5,988(1,277)
3,685

30,594(32,893)

391	
377

319
–

–
–

(3,484)(3,484)

2,288
2,408
(1,196)	1,212(2,299)(1,087)

768
(319)

319
–

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES62

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

6.50%
6.93%
7.26%
n/a
6.69%
8.79%
4.00%
n/a

1,997
6,510
1,652
3,648
546
70,462
1,577
464

1,789
5,906
1,289
–
345
30,755
300
–

–
249
134
–
113
4,276
–
–

–
149
14
–
68
9,894
–
–

–
–
162
–
20
25,648
624
–

–
–
53
–
–
147
–
–

208
206
–
3,648
–
(258)
653
464

Total financial assets		
Non-financial assets
n/a

86,856
12,531

40,384–

4,772–

10,125–26,454
–

200
–

4,921
12,531

Total assets		

99,38740,384

4,772

10,12526,454200

17,452

Liabilities
Due to other financial institutions
5.30%
Deposits and other borrowings
5.80%
Due to subsidiary companies
7.33%
Derivative financial instruments
n/aPayables and other financial liabilities
n/a
Bonds and notes
6.96%
Related party funding
7.25%
Loan capital
7.92%

2,357
51,067
29,347
2,916
920
935
2,643
1,522

2,209
33,211
25,020
–
133
495
2,643
318

–
7,263
2,815
–
–
–
–
554

–
3,402
–
–
–
–
–
–

–
1,963
858
–
–
440
–
650

–
1,150
654
–
–
–
–
–

148
4,078
–
2,916
787
–
–
–

Total financial liabilities		
Non-financial liabilities
n/a
Equityn/a91,707510
7,170

64,029––10,632
–
–

3,402
–
–

3,911
–
–

1,804
–
–

7,929
510
7,170

Total liabilities and equity		

99,38764,02910,632

3,402

3,911

1,804

15,609On-balance sheet interest
sensitivity gap		
Hedging instruments
n/a

–
–

(23,645)
24,443(5,860)
5,133

6,723
(14,437)

22,543(15,657)(1,604)
518

1,843
–

Interest sensitivity gap – net		
Interest sensitivity gap – cumulative		

–
–

798
798

(727)
71

(7,714)(7,643)

6,886
(757)

(1,086)(1,843)

1,843–

Parent – Unaudited
31/03/2006

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 COMPANIES63

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

2,384
4,739
1,245
–
342
31,649
472
–

13
320
209
–
–
4,691
140
–

8
8
1
–
–
9,493
–
–

–
5
46
–
3
28,772
240
–

–
–
95
–
–
134
–
–

293
39
–
2,019
4
(286)
653
737

Total financial assets		
Non-financial assets
n/a

88,468
11,591

40,831
–

5,373
–

9,510
–

29,066
–

229
–

3,459
11,591

Total assets		

100,059

40,831

5,373

9,510

29,066229

15,050

5.40%
6.03%
7.49%
n/a

2,828
53,59428,6481,992

2,744
36,206
23,698
–

–
5,818
1,607
–

–
4,125
1,211
–

–
3,526
2,132
–

–
–
–
–

84
3,919
–
1,992

n/a
7.07%
7.25%
7.88%

755
475
2,720
1,805

5
175
2,720
213

10
–
–
592

–
–
–
550

32
300
–
450

90
–
–
–

618
–
–
–

Total financial liabilities		
Non-financial liabilities
n/a
Equityn/a92,817593
6,649

65,761
–
–

8,027
–
–

5,886
–
–

6,440
–
–

90
–
–

6,613
593
6,649

Total liabilities and equity

100,059

65,761

8,027

5,886

6,440

90

13,855On-balance sheet interest
sensitivity gap		
Hedging instruments		

––(24,930)
24,785(2,654)
1,627

3,624
(2,901)

22,626(23,691)

139
180

1,195
–

Interest sensitivity gap – net		
Interest sensitivity gap – cumulative		

–
–

(145)
(145)

(1,027)(1,172)723(449)(1,065)(1,514)319(1,195)

1,195–

Parent – Audited
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

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

Beyond Not Bearing
5 Years
Interest$m$m

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES64

NOTES 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.
Consolidated
Unaudited
Audited31/03/2006 30/09/2006$m$m

Unaudited
31/03/2007$m

ParentUnaudited
31/03/2006$m

Audited30/09/2006$m

On-balance sheet credit exposures

Unaudited
31/03/2007$mLiquid 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

5,741	
3,067
1,917
3,041	
45
82,258
–
714

1,997
7,110
1,652
3,648
556
74,176
–
559

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

5,740
2,580
1,916
3,066
35
78,570
1,543
606

1,997
6,510
1,652
3,648
546
70,462
1,577
464

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

Total on-balance sheet credit exposures

96,78389,69891,26894,05686,856

88,468

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

Unaudited
31/03/2007$mConsolidated
Unaudited
Audited31/03/2006 30/09/2006$m$m

Unaudited
31/03/2007$m

ParentUnaudited
31/03/2006$m

Audited30/09/2006$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

3,108
49,85013,122
202
2,802
855
2,774
1,459
224
13,370
1,418
5,773
833
963
30

2,927
43,508
11,691
103
3,010
673
2,397
1,205
179
18,863
1,363
2,058
794
904
23

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

2,518
49,85012,872
181	
2,437
678
2,692
1,057
200
13,014
1,302
5,678
605
944
28

2,371
43,476
11,451
80
2,579
523
2,319
817
148
18,388
1,277
1,964
550
890
23

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

96,78389,69891,26894,05686,856

88,468Analyses of financial assets by geographic area are based on the Reserve Bank M3 Institutions Standard Statistical Return criteria.
Consolidated
Unaudited
Audited31/03/2006 30/09/2006$m$m

Unaudited
31/03/2007$m

ParentUnaudited
31/03/2006$m

Audited30/09/2006$m

Concentrations of credit risk by geographical area

Unaudited
31/03/2007$m

New ZealandOverseas
Exposures not classified in Reserve Bank M3 Return

88,4694,202
4,112

79,3695,890
4,439

82,3505,891
3,027

87,6542,373
4,029

78,575
3,939
4,342

81,5074,021
2,940

Total on-balance sheet credit exposures

96,78389,69891,26894,05686,856

88,468ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES65NOTES 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:		
31/03/2007
Number of Counterparties
Peak forAs at
the quarter
10% to 20% of equity

2

2

Consolidated
31/03/2006
Number of Counterparties
Peak forAs at
the quarter1

1

30/09/2006
Number of Counterparties
Peak forAs at
the quarter2

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:		
31/03/2007% of Total
AmountCredit$m
Exposure
As at
Investment grade credit rating (Note 1)
2,500	100.0%
Peak for the quarter
Investment grade credit rating (Note 1)

2,610	100.0%

Consolidated
31/03/2006% of Total
AmountCredit$m
Exposure

30/09/2006% of Total
AmountCredit$m
Exposure

1,301

100.0%

2,281

100.0%

1,301

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:		
31/03/2007
Number of Counterparties
Peak forAs at
the quarter
10% to 20% of equity
20% to 30% of equity

1	
–

2
–

Consolidated
31/03/2006
Number of Counterparties
Peak forAs at
the quarter
1
–

–
1

30/09/2006
Number of Counterparties
Peak forAs at
the quarter
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
31/03/2007
31/03/2006
30/09/2006% of Total% of Total% of Total
AmountCreditAmountCreditAmountCredit$m
Exposure$m
Exposure$m
Exposure
As at
Investment grade credit rating (Note 1)
1,343	100.0%
1,185
100.0%
1,700
100.0%
Peak for the quarter
Investment grade credit rating (Note 1)

2,516	100.0%

1,773

100.0%

2,546

100.0%

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.

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES66

NOTES TO THE FINANCIAL STATEMENTS (continued)
36. CONCENTRATIONS OF CREDIT RISK (continued)
Concentrations of credit risk to connected persons
Consolidated
Unaudited 31/03/2007
Unaudited 31/03/2006
Audited 30/09/2006
		 % of Group		% of Group		% of Group
AmountTier 1	
AmountTier 1
AmountTier 1$m
Capital$m
Capital$m
CapitalAggregate at end of period
Connected persons (Note 2)
1,454
27.3%
1,595
31.4%
1,191
25.2%
Non-bank connected persons (Note 3)
–
0.0%
–
0.0%
–
0.0%
Peak end-of-day for the quarter (Note 4)
Connected persons
1,612
30.2%
1,641
32.3%
1,826
38.6%
Non-bank connected persons
–
0.0%
–
0.0%
–
0.0%
Rating-contingent limit (Note 5)
Connected persons
n/a
70.0%
n/a
70.0%
n/a
70.0%
Non-bank connected persons
n/a	15.0%
n/a
15.0%
n/a
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 31 March 2007 (31/03/2006 $nil; 30/09/2006 $nil). The
Banking Group had no contingent exposures arising from risk lay-off arrangements to connected persons as at 31 March 2007 (31/03/2006 $nil;(30/09/2006 $nil).
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. There are no loans made to other directors of the Banking Group.
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 90 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. While the
Bank received a revised rating from Standard & Poor’s during the quarter, no changes to the rating-contingent limit have occurred, as where the
Bank has more than one credit rating, the lowest rating is used in determining the connected exposure limit.

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.
Consolidated
Unaudited
Audited31/03/2006 30/09/2006$m$m

Unaudited
31/03/2007$m

ParentUnaudited
31/03/2006$m

Audited30/09/2006$m

Net open position

Unaudited
31/03/2007$m

Australian dollar
Euro
Japanese yen
Pound sterling
US dollar
Other

13
–
–
18
(31)
5

(15)
(4)
(8)
(3)
(31)
(7)

33
(9)
–
(1)
35
–

13
–
–
18
(31)
5

(15)
(4)
(8)
(3)
(31)
(7)

33
(9)
–
(1)
35
–

4

(68)

58

4

(68)

58

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES67NOTES TO THE FINANCIAL STATEMENTS (continued)
38. CONCENTRATIONS OF FUNDING

Concentrations of funding by industry

Unaudited
31/03/2007$mConsolidated
Unaudited
Audited31/03/2006 30/09/2006$m$m

Unaudited
31/03/2007$m

ParentUnaudited
31/03/2006$m

Audited30/09/2006$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

1,879
1,357
1,220
642
1,196
579
153
39,714
5,049
1,537
370
502
32,881	

1,651
1,252
1,274
622
1,136
521
62
38,040
4,495
1,370
543
524
29,650

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

1,879
1,357
1,220
642
1,196
579
153
48,676
5,049
1,537
170
502
30,896

1,651
1,252
1,274
622
1,136
521
62
47,090
4,495
1,370
343
524
27,531

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

87,07981,14084,156

93,856

87,871

90,070Due 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

4,178
5,190
26,231	
21,659
3,953
5,565
1,960
200
–
13,340
2,764
2,039

3,936
4,359
25,67817,369
4,078
7,913
2,119
200
–
11,323
2,643
1,522

3,987
3,941
26,293
19,856
3,919
6,890
2,077
200
–
12,4682,720
1,805

1,741	
5,190
26,231	
21,244
3,953–––
30,185
509
2,764
2,039

2,357
4,359
25,678
16,952
4,078–––
29,347
935
2,643
1,522

2,828
3,941
26,293
19,441
3,919–––
28,648
475
2,720
1,805

Total concentrations of funding by product87,07981,14084,156

93,856

87,871

90,070

New ZealandOverseas

57,07730,002

51,17029,97054,41629,74065,22028,63659,037
28,834

61,46028,610Total concentrations of funding by geographical area

87,07981,14084,156

93,856

87,871

90,070Concentrations of funding by productConcentrations of funding by geographical area

Analyses 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.
		Consolidated
Unaudited 31/03/2007
Unaudited 31/03/2006
Audited 30/09/2006
Number of Counterparties
Number of Counterparties
Number of Counterparties
Peak for		
Peak for		
Peak for
Exposures to market risk
As at
the quarter
As at
the quarter
As at
the quarter
Aggregate foreign currency exposures ($ million)
Aggregate foreign currency exposures as apercentage of equity
Aggregate interest rate exposures ($ million)
Aggregate interest rate exposures as a percentageof equity
Aggregate equity exposures ($ million)
Aggregate equity exposures as a percentageof equity

7.6

13.3

3.1

12.0

6.0

19.3

0.1%
313.8

0.1%
327.4

0.0%
189.4

0.1%
189.4

0.1%
250.9

0.2%
318.9

3.5%
0.2

3.7%
0.5

2.2%
0.2

2.2%
0.7

3.1%
0.5

3.9%
0.5

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES68NOTES 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 and officers of the bank act as trustee and/or manager for a number of unit trusts and superannuation funds. The
Bank provides private banking 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.
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.
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 and superannuation schemes, unit trusts and the provision ofprivate banking services to a number 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 31
March 2007, $1,025 million of funds under management were invested in the Banking Group’s own products (31/03/2006 $992 million; 30/09/2006$815 million).
Funds management activities conducted by the ING New Zealand joint venture are not included in the funds managed by the Banking Group, as the
Banking Group does not have control of the ING New Zealand joint venture.
The aggregate value of funds managed by the Banking Group at balance date was:Superannuation schemes
Bonus Bonds
Discretionary funds
Totals funds under management

31/03/2007
$m
180
2,420
1,865
4,465

Consolidated
31/03/2006
30/09/2006
$m
$m
11
170
2,308
2,397
1,493
1,655
3,812

4,222

No funding was provided to funds managed by the Banking Group during the quarter ended 31 March 2007 (31/03/2006 $nil; 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 New Zealand 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.

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES69

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:
Unaudited 31/03/2007
Unaudited 31/03/2006
Audited 30/09/2006
Face orCreditFace orCreditFace orCreditContract EquivalentContract EquivalentContract Equivalent
Value
AmountValue
AmountValue
AmountCredit related commitments
$m
$m
$m
$m
$m
$m
Consolidated
Commitments with certain drawdown due within one year
Commitments to provide financial services

2,375
2,375
20,102	1,007

1,316
18,898

1,316
715

1,221
20,338

1,221
1,175

Total credit related commitments

22,477

3,382

20,214

2,031

21,5592,396

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

2,375
19,897

2,375
990

1,316
18,429

1,316
715

1,221
20,156

1,221
1,175

Total credit related commitments

22,272

3,365

19,7452,031

21,3772,396

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

1,815	1,815362
362
371	185
150
30

1,507
383
328
279

1,507
383
164
56

1,688
368
376
89

1,688
368
188
18

Total contingent liabilities

2,698

2,392

2,497

2,110

2,521

2,262

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

1,815	1,815362
362
371	185
148
30

1,507
383
328
277

1,507
383
164
55

1,688
368
376
87

1,688
368
188
17

Total contingent liabilities

2,696

2,495

2,109

2,519

2,261

Contingent liabilities

2,392

The Banking Group guarantees the performance of customers by issuing standby letters of credit and guarantees to third parties, including its
ultimate parent. The risk involved is essentially the same as the credit risk involved in extending loan facilities to customers, therefore thesetransactions are subjected to the same credit origination, portfolio management and collateral requirements for customers applying for loans. As thefacilities 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 COMPANIES70

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 ofan audit of the 2000–2003 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 aformal 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 statutebarred). Proceedings disputing the amended tax assessments with respect to the 2000 and 2001 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
similar transactions is correct.
The tax adjustments proposed so far by the IRD cover the 2000 to 2003 tax years and imply a maximum potential liability of $159 million ($229
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 thesame position be taken by the IRD for all years on all these transactions, including those that the Notices cover, the maximum potential liability
would be approximately $365 million ($484 million with interest tax effected) as at 31 March 2007.
Of the maximum potential tax liability in dispute, it has been estimated that approximately $99 million ($137 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, andwhich relate to transactions undertaken by NBNZ Group before December 2003.
This leaves a net potential tax liability as at 31 March 2007 of $266 million ($347 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 COMPANIES71

NOTES TO THE FINANCIAL STATEMENTS (continued)
42. COMMITMENTS
Unaudited
31/03/2007$mConsolidated
Unaudited
Audited31/03/2006 30/09/2006$m$m

Unaudited
31/03/2007$m

ParentUnaudited
31/03/2006$m

Audited30/09/2006$m

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

16

37

38

–

–

–

Total capital expenditure commitments

16

37

38

–

–

–

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

84
162
29

81
180
42

79
172
39

22
37
–

19
42
3

19
39
–

Total lease rental commitments

275

303

290

59

64

58

Total commitments

291	

340

328

59

64

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, therefore are expensed as incurred.

43. INTEREST EARNING AND DISCOUNT BEARING ASSETS AND LIABILITIES
Unaudited
31/03/2007$mConsolidated
Unaudited
Audited31/03/2006 30/09/2006$m$m

Unaudited
31/03/2007$m

ParentUnaudited
31/03/2006$m

Audited30/09/2006$mInterest earning and discount bearing assets

92,821	

85,36388,39889,503

81,93585,009Interest and discount bearing liabilities

83,10877,05080,29389,822

83,77886,204

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES72

NOTES TO THE FINANCIAL STATEMENTS (continued)
44. SEGMENTAL ANALYSIS
For segment reporting purposes, the Banking Group is organised into four major business segments – Retail Banking, Relationship Banking,Institutional and UDC. 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 the personal banking segment and the small business segment through separate
ANZ and The National Bank branded distribution channels. Personal banking customers have access to a wide range offinancial services and products. Small business banking services are offered to enterprises with annual revenues of less than
$5 million. Included in 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 minor profit centres supporting the Retail Banking segment(e.g. Direct Banking and the ING joint venture).

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 $5 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 and services.
Institutional

Comprises businesses that provide a full range of financial services to the Banking Group’s largest corporate and institutionalcustomers. 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 then $100 million.
– Corporate and Structured Finance – provides specialist lending, underwriting and capital structuring and solutions tocorporates, 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.

UDC

UDC is primarily involved in the financing and leasing of equipment, plant and machinery for small and medium sizedbusinesses.

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.
		Relationship
Consolidated –Retail Banking
Banking Institutional
UDC
Other
Total
Unaudited 6 months to 31/03/2007
$m
$m
$m
$m
$m
$m
Continuing operation1,2
External interest income
External interest expense
Net intersegment interest

1,937	1,129
(915)
(245)
(421)
(604)

763
(689)
24

85
(72)
22

9
(895)
979

3,923
(2,816)–

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

601	
241	

Net operating income
Other external expenses
Net intersegment expenses3

852
278
181	

Operating expenses

459	104

7

653

Profit before provision for credit impairment and income tax
Provision for credit impairment393
208	151	
20	10425	11	
(7)	1	–

876
30

Profit before income tax
Income tax expense368	197	158	19	104
116
65
45
6
55

846
287

Profit after income tax from continuing operations

252	132	113	13

49

559

76

76

252	132	113	13	125635

Discontinued operation
Profit from discontinued operation (net of income tax)
Profit after income tax
Non-cash expenses
Depreciation and amortisation
Balance sheet
Total external assets
Share in associates and jointly controlled entities
Total external liabilities

10

–

5
48,398196
32,910280
98
35
93	1,10732	119	1	18
411
–	1	
312
51	
53

–

–	11

218
36	111	1,529
44	13
233
619
23
3
(226)
34

–

67	16

–

–	1	

–

–

26,885	19,834	1,692
–	11	
–
8,146
22,2392,042

264,149	100,958(17)	190
26,72992,066

Geographic segment analysis
The Banking Group operates predominantly in New Zealand. No other geographic segments are reportable secondary segments.
1
2
3

Results are equity standardisedIntersegment transfers are accounted for and determined on an arm’s length or cost recovery basis.
Net intersegment expenses are eliminated at the ultimate parent bank level.

32

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES73

NOTES TO THE FINANCIAL STATEMENTS (continued)
44. SEGMENTAL ANALYSIS
		 Relationship
Consolidated –Retail Banking
Banking Institutional
Unaudited 6 months to 31/03/2006$m$m$m
Continuing operations1,2
External interest income
External interest expense
Net intersegment interest

UDC
$m

Other
$m

Total
$m

1,673
(785)
(335)

948
(213)
(486)

746
(732)
88

86
(74)
22

2
(633)
711

3,455
(2,437)–

Net interest income

553

249

102

34

80

1,018

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

224

31

149

2

20

426

12

–

–

–

–

12

Net operating income
Other external expenses
Net intersegment expenses3

789
274
172

280
49
50

251
42
22

36
14
3

100
256
(199)

1,456
635
48

Operating expenses

446

99

64

17

57

683

Profit before provision for credit impairment and income tax
Provision for credit impairment

343
3

181
–

187
9

19
1

43
–

773
13

Profit before income tax
Income tax expense

340
109

181
60

178
53

18
6

43
14

760
242

Profit after income tax from continuing operations

231

121

125

12

29

518

–

–

–

–

2

2

231	

121

125

12

31

520

5

–

–

–

65

70

43,021
176
29,78823,372–
7,647

21,813
16
21,872

1,681
–
2,224

4,407
(18)
24,237

94,294
174
85,768Discontinued operation
Profit from discontinued operation (net of income tax)
Profit after income tax
Non-cash expenses
Depreciation and amortisation
Balance sheet
Total external assets
Share in associates and jointly controlled entities
Total external liabilities

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 COMPANIES74

NOTES TO THE FINANCIAL STATEMENTS (continued)
44. SEGMENTAL ANALYSIS
		 Relationship
Consolidated –Retail Banking
Banking Institutional
Audited year to 30/09/2006
$m
$m
$m

UDC
$m

Other
$m

Total
$m

Continuing operations1, 2External interest income
External interest expense
Net intersegment interest

3,489(1,645)
(713)

1,991
(452)
(1,021)

1,369(1,039)
(90)

170
(149)
47

187
(1,792)
1,777

7,206
(5,077)–

Net interest income

1,131

518

240

68

172

2,129

462

62

231

2

23

780

22

–

–

–

–

22

1,615
547
345

580
100
100

471
83
45

70
34
1

195
483
(415)

2,931
1,247
76

Operating expenses

892

200

128

35

68

1,323

Profit before provision for credit impairment and income tax
Provision for credit impairment

723
14

380
(10)

343
12

35
2

127
–

1,608
18

Profit before income tax
Income tax expense

709
225

390
130

331
101

33
11

127
56

1,590
523

Profit after income tax from continuing operations

484

260

230

22

71

1,067

–

–

–

–

5

5

Profit after income tax

484

260

230

22

76

1,072

Non-cash expenses
Depreciation and amortisation

10

–

1

1

128

140

45,399186
31,65325,291–
8,026

18,4598
20,656

1,627
–
2,149

5,248
(17)
25,30796,024
177
87,791Other external operating income
Share of profit of equity accounted associates
and jointly controlled entities
Net operating income
Other external expenses
Net intersegment expenses3

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

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 COMPANIES75NOTES TO THE FINANCIAL STATEMENTS (continued)
45. NOTES TO THE CASH FLOW STATEMENTS

Consolidated
Unaudited
Unaudited
Audited
6 months to 6 months toYear to31/03/2007 31/03/2006 30/09/2006
$m
$m
$m

ParentUnaudited
Unaudited
6 months to 6 months to
31/03/2007 31/03/2006$m$m

AuditedYear to30/09/2006$m

Reconciliation of profit after income tax to net cash flows
used in operating activities
Profit after income tax

635

520

1,072

425

287

611

Non-cash items:
Depreciation and amortisation
Provision for credit impairment
Writedown of investment in subsidiary company
Amortisation of premiums and discounts
Deferred fee revenue and expenses
Share-based payment expense

32
30
–
32
–
7

70
14
–
(7)
7
5

140
19
–
12
6
10

13
29
–
32
(1)
7

17
12
–
(7)
6
5

31
16
1
12
7
10

Deferrals or accruals of past or future operating cash receipts
or payments:
Increase in operating assets and liabilities(954)(Increase) decrease in interest receivable(38)
Increase in interest payable
63(Increase) decrease in accrued income(16)(Decrease) increase in accrued expenses(35)(Decrease) increase in provisions(6)
Decrease (increase) in income tax assets
72
Increase (decrease) in income tax liabilities
39(4,129)
(68)
52
(14)
(6)
7
109
18

(5,728)
(88)
74
(27)
2
(6)
(3)
63

(805)
(31)
67
(16)
(37)
(4)
17
41	

(3,212)
(39)
23
(12)
(7)
7
111
2

(3,320)
(65)
26
(25)
8
(6)
(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

(11)
(76)
–
–

(12)
–
–
–

(22)
–
(2)
–

(11)
–
–
–

(12)
–
–
–

(22)
–
–
(1)

Net cash flows used in operating activities(226)(3,434)(4,478)(274)(2,819)(2,692)

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES76

NOTES TO THE FINANCIAL STATEMENTS (continued)
46. RELATED PARTY TRANSACTIONS

Key management personnel

Consolidated
Unaudited
Unaudited
Audited
6 months to 6 months toYear to31/03/2007 31/03/2006 30/09/2006
$’000
$’000
$’000

ParentUnaudited
Unaudited
6 months to 6 months to
31/03/2007 31/03/2006
$’000
$’000

AuditedYear to30/09/2006$’000

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

4,941	
168
82
–
1,050

5,176
212
88
2,218
969

10,744
364
147
2,218
1,992

4,701	
166
64
–
1,038

5,032
211
86
1,931
960

10,473
364
144
1,931
1,974

Total compensation of key management personnel

6,241	

8,663

15,465

5,969

8,220

14,886Loans to key management personnel

8,279

5,991

7,308

8,279

5,991

7,304

Deposits from key management personnel

3,699

4,811

4,500

3,692

4,811

4,495

Loans made to and deposits held by key management personnel (including personally related parties) are made in the ordinary course of 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 (31/03/2006 $nil; 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 normal 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 six
months ended 31 March 2007 (31/03/2006 $nil; 30/09/2006 $nil).

Interest income– Subsidiary companies– Parent Company– Ultimate Parent Company
Interest expense– Subsidiary companies– Parent Company– Ultimate Parent Company
Operating expenses– Ultimate Parent Company– Arawata Assets Limited– UDC Finance Limited– Truck Leasing Limited

Consolidated
Unaudited
Unaudited
Audited
6 months to 6 months toYear to31/03/2007 31/03/2006 30/09/2006
$m
$m
$m

ParentUnaudited
Unaudited
6 months to 6 months to
31/03/2007 31/03/2006$m$m

AuditedYear to30/09/2006
$m

–
7
2

–
6
–

–
11
–

29
7
2

24
6
–

79
11
–

–
100
89

–
94
66

–
190
141

974
100
27

769
94
28

1,824
190
48

34
–
–
–

46
–
–
–

76
–
–
–

34
49
(2)
–

46
39
(5)
2

76
88
(9)
4

Transactions with associates and joint venture entities
During the period the Banking Group conducted transactions with associates and joint venture entities on normal commercial terms andconditions as shown below:
Aggregate
Amounts receivable– associates– joint venture entities

25
29

43
103

18
140

18
11	

31
103

18
121

Interest income– associates– joint venture entities

–
5

1
2

2
7

–
3

1
2

1
6

Commission received from ING New Zealand joint venture
Costs recovered from ING New Zealand joint venture

10
1	

11
1

23
2

10
1	

11
1

23
2

The Banking Group provides registry services to the ING New Zealand joint venture in connection with the business of ING Managed Funds (NZ)
Limited until 31 December 2006.
During the period the Banking Group provided payroll, tax accounting and compliance services, and premises in connection with and for the purposeof ING Insurance Services (NZ) Limited and ING Managed Funds (NZ) Limited.
A provision for credit impairment of $9 million is recognised for amounts outstanding from associates as at 31 March 2007 (31/03/2006 $11 million;
30/09/2006 $16 million).
No credit impairment loss was recognised on amounts outstanding from associates during the six months ended 31 March 2007 (31/03/2006 $4
million; 30/09/2006 $6 million).

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES77NOTES 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
100
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
100
Pioneer First Limited
100
Private Nominees 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

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

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

Non operative
Finance company
Finance entity
Mortgage financeMortgage financeNominee company
Investment company
Investment company
Investment company
Finance company
Investment company
Investment company
Finance company

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES78

NOTES TO THE FINANCIAL STATEMENTS (continued)
47. CONTROLLED ENTITIES, ASSOCIATES AND INTERESTS IN JOINTLY CONTROLLED ENTITIES (continued)
All controlled entities are incorporated in New Zealand, unless stated.
For all controlled entities, with the exception of Amberley Investments, the ownership interest percentage equates to the voting power held. A votinginterest of 90% is held in Amberley Investments.
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.
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. Refer to Note 10 for full disclosure of the financial impact of the sale.
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.
VotingOwnership
Balance
Associates
Interest %Interest %Dates
Nature of business
Cards NZ Limited
Chequer Corporation Limited
Electronic Transaction Services Limited
Green Acres Franchise Group Limited
Mondex New Zealand Limited
Wyma Engineering (NZ) Limited

25
45
25
43
40
31

17
81
25
43
40
31

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

Card services
Plastics manufacturing and recycling
Eftpos settlements
Home maintenance franchise
Card services
Agricultural machinery supplier

All associates are incorporated in New Zealand.
On 8 March 2007, ANZ Capital NZ Limited acquired a 31% ownership interest in Wyma Engineering (NZ) Limited.

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES79

NOTES TO THE FINANCIAL STATEMENTS (continued)
47. CONTROLLED ENTITIES, ASSOCIATES AND INTERESTS IN JOINTLY CONTROLLED ENTITIES (continued)
Jointly controlled entities
Argenta Limited
BCS Group Limited
ING (NZ) Holdings Limited
JMI Aerospace Limited

VotingInterest %
25
39
50
33

Ownership
Interest %
25
39
49
33

BalanceDates
31 July
30 June31 December
31 March

Nature of business
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.
The joint ventures will adopt NZ IFRS in 2007. The ING New Zealand Joint Venture adopted NZ IFRS on 1 January 2007. There are not expected
to be any material impacts on the Banking Group when the joint ventures adopt NZ IFRS.
The summarised financial information relating to the Banking Group’s investment in ING (NZ) Holdings Limited is as follows:
Parent and Consolidated
Unaudited
Unaudited
Audited31/03/2007
31/03/2006
30/09/2006$m$m$m
Share of assets and liabilities
Investments
Other assets

81	
156

92
163

80
176

Total assets

237

255

256

Life insurance policy liabilities
Other liabilities

31	
10

63
16

52
18

Total liabilities

41	

79

70

Net assets

196

176

186

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

26
14

5
17

32
35

Total revenue
Expenses

40
30

22
11

67
44

Profit before income tax
Income tax (credit) / expense

10
–

11
(1)

23
1

Profit after tax

10

12

22

Share of commitments
Lease commitments

2

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 31 March 2007 (31/03/2006 $nil;
30/09/2006 $nil).

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES80

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 I framework. The capital adequacy
ratios are:Unaudited
Unaudited
Audited31/03/2007
31/03/2006
30/09/2006
Tier 1 Capital
Total Capital

6.7%
10.3%

6.8%
10.4%

6.8%
10.6%

The Ultimate Parent Company meets those requirements imposed on it by its home supervisor as at 31 March 2007 whereby banks must maintain aratio 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 1 May 2007.
On 12 April 2007, an interim ordinary dividend of $360 million was declared, to be paid to the parent company, ANZ Holdings (New Zealand)
Limited. The dividend per share was $0.51.

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES81

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 31 March 2007 was A$29.70 (31/03/2006
A$26.50; 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
to satisfaction of a three year service period but may be forfeited in the event of resignation or termination for serious misconduct. On expiration ofthat 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 period to 31 March
2007, 269,025 shares with an average issue price of A$27.88 were issued under the A$1,000 Share Plan (31/03/2006 308,919 shares with an average
issue price of A$23.67 were issued; 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 priceis based on 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 areforfeited on resignation or dismissal, or if a performance condition has not been met.
During the period to 31 March 2007, no shares were issued under the deferred share plan (31/03/2006 no shares were issued; 30/09/2006 no shareswere 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 conclusionof 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
ANZ shares granted. The fair value of shares granted in the current period, measured at the date of grant of the shares, is NZ $9 million based on
269,025 shares at a weighted average price of A$27.88 converted at the exchange rate of 0.8391 (31/03/2006: $8 million based on 308,919 sharesat a weighted average price of A$23.67 converted at the exchange rate of 0.9015 were issued; 30/09/2006: $8 million based on 308,919 shares at aweighted 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
zero-priced 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 thatwill become exercisable will depend upon the TSR achieved by ANZ relative to the companies in the comparator group, which consists of selectedmajor financial services companies in the Standard & Poor’s and ASX 100 Index. Performance equal to the median TSR of the comparator groupwill result in half the rights becoming exercisable. Performance above the median will result in further performance rights becoming exercisable,
increasing on a straight line basis until all of the rights become exercisable where ANZ’s TSR is at or above the 75th percentile in the comparatorgroup. 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 ifthey 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 resignationor 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. All other rights will lapse. In the case of retrenchment or retirement, performance rights will be performance tested at the dateof 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 death or 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. Performance rights must be exercised by the seventh
anniversary of grant 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 ortotal and permanent disablement, a grace period is provided in which to exercise all performance rights.

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES82

NOTES 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 period
and movements during the period are set out below:
Consolidated/Parent
31/03/2007
31/03/2006
30/09/2006
Weighted		Weighted		Weighted		
average		
average		
average
Numberexercise
Numberexercise
Numberexerciseof shares
price1of shares
price1of shares
price1A$		
A$		
A$
Share options at beginning of the period
Share options granted
Share options exercised
Share options forfeited and expired

1,668,436	17.49
293,864–(153,990)	17.38(15,801)	18.60

1,590,402
439,415(131,363)(63,544)

18.20
14.75
16.27
17.93

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

18.20
14.75
17.07
18.65

Share options at end of the period

1,792,509	14.57

1,834,910

17.59

1,668,436

17.49

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

28.49		24.30		25.250.00 – 23.49		 0.00 – 23.49		 0.00 – 23.49
50 months		

60 months		

55 months

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
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

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

Special deferredsharerights (b)STI deferredsharerights (b)LTI deferredsharerights (b)Performancerights (b)1-Nov-2006
4,060$27.54$nil$29.5415%
5 years
18 months
18 months
4.80%
6.11%

1-Nov-2006
69,234$26.89$nil$29.5415%
5 years
2 years
2 years
4.80%
6.11%

1-Nov-2006
28,516$25.66$nil$29.5415%
5 years
3 years
3 years
4.80%
6.02%

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

*For modelling purposes a 10% p.a. turnover rate (post vesting) has been assumed and that option holders will exercise their options if the shareprice is greater than twice the exercise price.
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 COMPANIES83

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 Group (New Zealand) Staff Superannuation Scheme1

The National Bank Staff Superannuation Fund1

Defined Benefit Scheme2orDefined Contribution Scheme

Nil

Balance of cost4

2.5% minimum of salary

7.5% of salary6

Defined Benefit Scheme3orDefined Contribution Scheme

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 31 March 2007.
Unaudited
31/03/2007$mConsolidated/Parent
Unaudited
Audited31/03/2006
30/09/2006$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 period
Current service cost
Interest cost
Contributions by scheme participants
Actuarial losses
Benefits paid

190
2
6
1	
3
(7)

187
2
6
1
10
(12)

187
4
11
1
7
(20)

Present value of funded defined benefit obligations

195

194

190

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

196
5
12
2
1	
(7)

195
6
8
2
1
(12)

195
11
5
4
1
(20)

Fair value of scheme assets

209

200

196

Net defined benefit asset recognised on balance sheet

14

6

6

Current service cost
Interest cost
Expected return on scheme assets (net of tax)
Contribution withholding tax

2
6
(5)
–

2
6
(6)
1

4
11
(11)
2

Total pension costs recognised in the income statement – defined benefit
superannuation schemes

3

3

6

The fair value of scheme assets include cash deposits and fixed interest investments of$5 million with the Banking Group (31/03/2006 $4 million; 30/09/2006 $9 million).
The amounts recognised in the income statement in respect of defined benefit schemes are as follows:

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
As recommended by the actuary, currently $nil (31/03/2006 $nil; 30/09/2006 $nil).
5
As recommended by the actuary, currently 22.3% (31/03/2006 22.3%; 30/09/2006 22.3%) of members’ salaries.
6
2007: 7.5% (31/03/2006 7.5%; 30/09/2006 7.5%) of members’ salaries.
7
2007: 11.2% (31/03/2006 11.2%; 30/09/2006 11.2%) of members’ salaries.
1
2

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES84

NOTES TO THE FINANCIAL STATEMENTS (continued)
51. RETIREMENT BENEFIT OBLIGATIONS (continued)
The actuarial gains and losses recognised directly in equity via the statement of recognised income and expense are as follows:
Consolidated/Parent
Unaudited
Unaudited
Audited31/03/2007
31/03/2006
30/09/2006
4
6
6
9
(2)
(2)

Actuarial gains (pre-tax) at beginning of the period
Actuarial gain (loss) (pre-tax) incurred during the period
Balance of actuarial gains (pre-tax) at end of the period

13

4

4

Income tax expense recognised directly in equity

(4)

(1)

(1)

Balance of actuarial gains at end of the period

9

3

3

The principal actuarial assumptions used were as follows:
The National Bank
Staff Superannuation Fund
31/03/2007 31/03/2006 30/09/2006

ANZ Group (New Zealand)
Staff Superannuation Scheme
31/03/2007 31/03/2006 30/09/2006

Defined benefits calculation
Discount rate (gross of tax)
Future price inflation
Future pension increases
Future salary increases

6.0%
2.5%
2.5%
3.0%

6.0%
2.5%
2.5%
3.0%

6.0%
2.5%
2.5%
3.7%

6.0%
2.5%
2.5%
n/a

6.0%
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%

5.5%

4.5%

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 4.2% for the six months ended 31 March
2007 (31/03/2006 6.5%; 30/09/2006 9.1%). The actual return on scheme assets (net of tax) for the ANZ Group (New Zealand) Staff Superannuation
Scheme was 2.6% for the six months ended 31 March 2007 (31/03/2006 2.6%; 30/09/2006 7.6%).
The investment return on scheme assets is taxed at 33% (31/03/2006 33%; 30/09/2006 33%).
The National Bank
Staff Superannuation Fund
31/03/2007 31/03/2006 30/09/2006

ANZ Group (New Zealand)
Staff Superannuation Scheme
31/03/2007 31/03/2006 30/09/2006

The major categories of scheme assets as a percentage ofthe fair value of scheme plan assets are as follows:
15.0%
22.0%
16.0%
12.0%
35.0%
0.0%

19.0%
25.0%
11.0%
11.0%
34.0%
0.0%

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

18.0%
18.0%
23.0%
7.0%
28.0%
6.0%

9.0%
24.0%
26.0%
10.0%
26.0%
5.0%

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

	100.0%100.0%

100.0%

100.0%

100.0%

100.0%Cash and short term debt instruments
New Zealand fixed interest
Overseas fixed interest
New Zealand equities
Overseas equities
Property

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

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES85

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
Unaudited
Unaudited
Audited
Audited31/03/2007 31/03/2006
30/09/2006 30/09/2005
$m
$m
$m
$m
(195)
209

(194)
200

(190)
196

(187)
195

Net benefit asset

14

6

6

8

Experience adjustments on scheme liabilities
Experience adjustment on scheme assets

3
12

–
8

3
5

–
11

Defined benefit obligation
Fair value of scheme assets

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 Group (New Zealand) 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 and differ to the actuarial valuations undertaken for NZ IFRS purposes.
The National Bank Staff Superannuation Fund deficit was valued at $5 million in the most recent actuarial valuation, 1 April 2006. The most recent
actuarial valuation for the ANZ Group (New Zealand) Staff Superannuation undertaken at 31 December 2004 was $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
2007 (30/09/2006 $4 million). Employer contributions are taxed at a rate of 33% (31/03/2006 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 Group (New Zealand) 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 COMPANIES86NOTES TO THE AND
DIRECTORATEFINANCIAL
AUDITORSSTATEMENTS (continued)
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.
Directors’ Interests
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 theyear.

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.
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.
Transactions with Directors
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 have been no changes in the Bank’s Board of Directors since theauthorisation date of the previous Disclosure Statement on 15 February
2007

Board Members as at 1 May 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
Nil
Non-Executive Directors
Dr Bob Edgar
Ph.D, BEc (Hons)
Senior Managing Director
Australia and New Zealand Banking Group Limited
Melbourne, Australia

John McFarlane, OBE
MA, MBA
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,
ANZIB Specialist Asset Management Limited, Tianjin City Commercial
Bank, ANZ Business Equity Fund Ltd (Alternative Director)

Directorships
Director: Australia and New Zealand Banking Group Limited, Ballimore
Pty Limited

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES

87

DIRECTORATE AND AUDITORS (continued)
Peter Ralph Marriott
BEc (Hons), FCA
Chief Financial Officer
Australia and New Zealand Banking Group Limited
Melbourne, Australia
Directorships
Director: Binnstone Traders Pty Limited, ANZ Capital Hedging Pty Limited,
ANZ (Delaware) Inc., ANZ Holdings (New Zealand) Limited, Deori Pty
Limited, Esanda Finance Corporation 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

Robert Arnold McLeod
B Com, LLB, FCA
Company 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
Chairman: Sealord Group Limited, Aotearoa Fisheries Limited, Raukura
Moana Fisheries Limited
Director: North East NZ Limited, North East Trustee Limited, North
East Statutory Supervisor Limited, Credit and Debit Limited, Debit andCredit (Wellington) Limited, Gullivers Travel Group Limited, Sky CityEntertainment Group Limited, Steward Limited, Tainui Group Holdings
Limited, Te Ohu Kai Moana Trustee Limited, Robert A McLeod Limited,
McLeod Custodian Limited, RAM Custodian Limited, Telecom Corporationof New Zealand Limited, Kura Limited

R A McLeod (Chairman)
Sir Dryden Spring
P R Marriott
N M T Geary

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, G K Hodges, J
McFarlane, OBE, R A McLeod and P R Marriott.
Auditors
KPMG
Chartered Accountants
10 Customhouse Quay
P O Box 996
Wellington, New ZealandANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES88

CONDITIONS OF REGISTRATION
Conditions of Registration, applicable as at 1 May 2007. These Conditionsof Registration have applied from 30 March 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 1 capital of the Banking Group is not less than 4 percent of risk
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 1 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 1 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 1 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 none of the following actions may be taken except with the consent
of the Reserve Bank:(i) Any transfer to another person or entity (other than the Bank or
any member of the Banking Group which is incorporated in, andoperating in, New Zealand) of all or a material part of any business(which term shall include the customers of the business) carried onby the Bank (or any member of the Banking Group); andANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES89

CONDITIONS OF REGISTRATION (continued)(ii) Any transfer or change by which all or a material part of the
management, operational capacity or systems of the Bank (or any
member of the Banking Group) is transferred to, or is to be performed
by, another person or entity other than the Bank (or any member ofthe Banking Group which is incorporated in, and operating in, New
Zealand); and(iii) Any action affecting, or other change in, the arrangements by which
any function relating to any business carried on by the Bank (or any
member of the Banking Group) is performed, which has or may
have the effect that all or a material part of any such function will
be performed by another person or entity other than the Bank (orany member of the Banking Group which is incorporated in, andoperating in, New Zealand); and(iv) Any action that prohibits, prevents or restricts the authority or
ability of the board of the Bank or any statutory manager of the
Bank (or the board of any member of the Banking Group or any
statutory manager of any member of the Banking Group) to haveunambiguous legal authority and practical ability to control andoperate any business or activity of the Bank (or any member of the
Banking Group).

13. (i) That no later than 31 December 2005 the Bank shall locate andcontinue to operate in New Zealand the Bank’s domestic systemand the board of directors of the Bank will have legal and practicalability to control the management and operation of the domestic
system.
(ii) That in respect of the international system the board of directors of
the Bank will, no later than 30 June 2007, have legal and practicalability to control the management and operation of the international
system.
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).
For the purposes of these conditions of registration, the term ‘domestic
system’ means all property, assets, systems and resources (including inparticular (but without limitation) the management, administrative andinformation technology systems) owned, operated, or used, by the Bank
supporting, relating to, or connected with:(ii) The Reserve Bank has advised that it has no objection to thatappointment.

(a) the New Zealand dollar accounts and channels servicing theconsumer banking market (but potentially also other customer
segments); and(b) the general ledger covering subsidiary ledgers for (a) above, together
with a daily updated summary of the subsidiary ledgers running on
the international system; and(c) any other functions, operations or business of, or carried on by, theBank (now or at any time in the future) that are not included in, orform part of, the international system;other than property, assets, systems and resources that are not material tothe domestic system, both individually and in aggregate.

12. (i) That the management of the Bank by its chief executive officer
shall be carried out solely under the direction and supervision of theboard of directors of the Bank.

For the purposes of these conditions of registration the term ‘international
system’ means those systems of the Bank generally having one or moreof the following characteristics:(ii) That the employment contract of the chief executive officer ofthe Bank shall be with the Bank. The chief executive officer’s
responsibilities shall be owed solely to the Bank and the terms andconditions of the chief executive officer’s employment agreement
shall be determined by, and any decision relating to the employment
or termination of employment of the chief executive officer shall bemade by, the board of directors of the Bank.

(a) supports foreign currency accounts/transactions;(b) supports cross-border trade, payments and other transactions;(c) supports businesses that operate in global markets;(d) supports accounts and transactions undertaken by institutions,
corporates and banks;(e) used to manage large, volatile risk businesses which operate on a
global basis;(f) used to service customers who conduct accounts and transactions
with the Bank in multiple countries;(g) used by the non-Bank subsidiary companies.

11. 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(iii) That all staff employed by the Bank shall have their remuneration
determined by (or under the delegated authority of) the chief
executive officer of the Bank and be accountable (directly or
indirectly) solely to the chief executive officer of the Bank.

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES90

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

Aa3

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 31 March 2007. The rating is not subject to any qualifications.
The Moody’s Investors Service rating was issued on 31 July 2000. There have been no changes in the credit rating issued in the past two years ended 31
March 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 COMPANIES91

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 COMPANIES

92

DIRECTORS’ STATEMENT for the six months ended 31 March 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 six months ended 31 March 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, 1 May 2007. On that date, theDirectors of the Bank were:
Dr R J Edgar
N M T Geary, CBE
G K Hodges
J McFarlane, OBE
R A McLeod
P R Marriott
Sir Dryden Spring

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES93

INDEPENDENT REVIEW REPORT for the six months ended 31 March 2007

Independent Review Report to the Directors of ANZ National Bank Limited
We have reviewed the interim financial statements, including supplementary information, on pages 4 to 85 in accordance with the Review Engagement
Standards issued by the New Zealand Institute of Chartered Accountants. The interim 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 subsidiary companies (the‘Banking Group’) as at 31 March 2007. This information is stated in accordance with accounting policies set out on pages 8 to 15.
The supplementary information is disclosed in accordance with clauses 12(3), 12(4) and 14A of the Registered Bank Disclosure Statement (Full and HalfYear – New Zealand Incorporated Registered Banks) Order 2007 (the ‘Order’).
Directors’ responsibilities
The Directors are responsible for the preparation of interim financial statements in accordance with clause 12(2) of the Order which give a true and fair viewof the financial position of the Registered Bank and Banking Group as at 31 March 2007 and the results of its operations and cash flows for the six months
ended on that date.
They are also responsible for the preparation of supplementary information which:•gives a true and fair view, in accordance with clause 12(3) and 14A 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.

Reviewers’ responsibilities
It is our responsibility to independently review the interim financial statements including supplementary information presented by the Directors and state
to you whether anything has come to our attention that would cause us to believe that the interim financial statements or supplementary information do notpresent a true and fair view of the matters to which they relate, in accordance with clause 15(2) of the Order.
Basis of opinion
A review is limited primarily to enquiries of Banking Group personnel and analytical review procedures applied to the financial data, and thus provides lessassurance than an audit. We have not performed an audit and, accordingly, we do not express an audit opinion.
Our firm has provided other services to the Registered Bank and Banking Group in relation to other audit related services. Partners and employees of our 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 the Registered
Bank and Banking Group. There are, however, certain restrictions on borrowings which the partners and employees of our firm can have with the Registered
Bank and Banking Group. These matters have not impaired our independence as auditors of the Registered Bank and Banking Group. The firm has no otherrelationship with, or interest in, the Registered Bank and Banking Group.
Review Opinion
Based on our review nothing has come to our attention that would cause us to believe that:•the interim financial statements on pages 4 to 85 do not present a true and fair view of the financial position of the Registered Bank and Banking Groupas at 31 March 2007 and the results of their operations and cash flows for the six months ended on that date in accordance with New Zealand equivalent
to International Accounting Standard 34, Interim Financial Reporting; and•the supplementary information disclosed in accordance with clause 12(3) and 14A of the Order does not present a true and fair view of the matters towhich it relates; and•the supplementary information disclosed in accordance with clause 12(4) of the Order does not comply with Schedules 7 and 8 of the Order.

Our review was completed on 1 May 2007 and our review opinion is expressed as at that date.

Wellington

ANZ NATIONAL BANK LIMITED AND SUBSIDIARY COMPANIES94

GENERAL DISCLOSURE STATEMENT for the six months ended 31 March 2007
Index
General Disclosures2

26 Bonds and Notes

42

Summary of Financial Statements

3

27 Related Party Funding

43

Income Statements

428 Loan Capital

44

Statements of Recognised Income and Expenses

529 Ordinary Share Capital

45

Balance Sheets

6

30 Reserves and Retained Profits

45

Cash Flow Statements

7

31 Capital Adequacy

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 – 30

12 Available-For-Sale Assets

31

13 Net Loans and Advances

31

32 Financial Risk Management

45 – 51
52

33 Fair Value of Financial Assets and Liabilities

53 – 54

34 Maturity Analysis of Assets and Liabilities

55 – 57

35 Interest Sensitivity Gap and Weighted Average Interest Rates 58 – 63
36 Concentrations of Credit Risk

64 – 66

37 Foreign Currency Risk

66

38 Concentrations of Funding

67

39 Market Risk

67

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

68

41 Contingent Liabilities and Credit Related Commitments

69 – 70

42 Commitments

71

43 Interest Earning and Discount Bearing Assets and Liabilities

71

44 Segmental Analysis

72 – 74

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

32

45 Notes to the Cash Flow Statements

75

15 Provision for Credit Impairment

33

46 Related Party Transactions

76

16 Investment for Controlled Entities, Associates and Jointly
Controlled Entities

34

47 Controlled Entities, Associates and Interests in Jointly
Controlled Entities

17 Other Assets

34

48 Parent Company and Ultimate Parent Company

80

18 Deferred Tax Assets

35

49 Subsequent Events

80

19 Premises and Equipment

36 – 37

77 – 79

50 Employee Share and Option Plans

81 – 82

20 Goodwill and Other Intangible Assets

38

51 Retirement Benefit Obligations

83 – 8521 Due to Other Financial Institutions

39

Directorate and Auditors

86 – 87

22 Deposits and Other Borrowings

39

Conditions of Registration

88 – 89

23 Payables and Other Liabilities

40

Credit Rating Information

90 – 92

24 Deferred Tax Liabilities

40

Directors’ Statement92

25 Provisions

41

Audit Review Report93

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 1 M a r c h 2 0 0 7     N u m b e r 4 5

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 six months ended 31 March 2007

Number 45 Issued May 2007

ANZ National Bank Limited