When people are inspired.

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

Concise Annual Report 2005 / Part 2 of 2 / Concise ReportGUIDE TO CONCISE REPORTANZ presents two reports, the ANZ Concise Annual Report (this document) and the
ANZ Financial Report. Both reports show how ANZ performed during the year ended
30 September 2005 and the overall financial position of the Group at the end of the year.
ANZ also publishes an announcement to the market each half year. All these documents
are on anz.com. ANZ prepares its financial reports in accordance with applicable Australian
Accounting Standards. Particular terms required by the Standards may not be familiar tosome readers. This guide and the Glossary of Financial Terms (on pages 94 and 95) aredesigned to assist readers to understand the Report.

CONTENTS
The ANZ Concise Annual Report is a concise
report for the purposes of section 314(2) of the
Corporations Act 2001 and comprises two parts:
Part 1 (Annual Review) and Part 2 (Concise Report).
The two parts are distributed together as one
document and should be read together. These
documents may only be distributed by a person on
the basis that Part 1 (Annual Review) and Part 2(Concise Report) are distributed together.
A copy of the full Financial Report for the year
ended 30 September 2005 for the Group, including
the independent Auditor’s Report, is available toall members, and will be sent to a member withoutcharge upon request. The Financial Report can berequested by telephone (Australia 1800 11 33 99
Overseas +613 9415 4010), by email atinvestor.relations@anz.com or viewed directlyon the Internet at www.anz.com

Guide to Concise Report
Corporate Governance Report
Directors’ Report
Principal Activities
ResultState of Affairs
Dividends
Review of Operations
Events Since the End of the
Financial Year
Future Developments
Environmental Regulation
Directors’ Qualifications, Experienceand Special Responsibilities
Company Secretaries’ Qualifications
and Experience
Non-Audit Services
Auditor’s Independence Declaration
Directors and Officers Who Were
Previously Partners of the Auditor
CEO/CFO Declaration
Directors’ and Officers’ Indemnity
Rounding of Amounts
Remuneration Report
Remuneration Tables
Non-Executive Directors’ Remuneration
Executive Remuneration
Chief Executive Officer’s Remuneration
Specified Executives’ Contract Terms
Equity Instruments Relating to
Directors and Specified Executives
Executive Officers’ Share Options
Financial Statements
Statement of Financial Performance
Statement of Financial Position
Statement of Cash Flows
Notes to the Concise Financial Statements
Directors’ Declaration
Auditor’s Report

46

47
48
59
59
59
59
59
59
60
60
60
60
60
60
61
61
61
61
61
62
62
66
67
71
72
74
81
82
82
83
84
85
90
90

Shareholder Information

91

Glossary of Financial Terms

94

This Concise Annual Report cannot be expected to provide as full anunderstanding of the Group’s financial performance, financial position
and financing and investing activities as the ANZ 2005 Financial Report.
Analysis and discussion of the Concise Financial Report are on pages
10 to 15 of Part 1 of this Concise Annual Report.

CONCISE ANNUAL REPORT CONTENTSCORPORATE GOVERNANCE REPORTThe ANZ Concise Annual Report has two
main sections – the 2005 Annual Review
and the Concise Report. The front section,
the Annual Review, contains information
about significant matters that impacted
the management and performance of
ANZ during the year, including discussion
and analysis of the financial results,
updates on the specialist business units
and Group-wide programs, the ten year
summary and information on the directors.

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

The Concise Report contains information
required by the Corporations Act 2001
(as amended), including:This report provides information on how
the business is performing and includes
details about the Group’s principal
activities, the Directors and Company
Secretaries. Details about the non-audit
services and the Auditor’s independence
declaration also form part of this report.
In addition, it contains remuneration
information on the Directors and Specified
Executives. Declarations are provided by
the CEO, CFO and the Auditor.

 a Concise Financial Report, drawn up
in accordance with applicable Australian
Accounting Standards, including theConsolidated Statements of Financial
Performance, Financial Position andCash Flows.
 the Directors’ Report, including theRemuneration Report.


the Auditor’s Report; and the Corporate Governance Report,
as recommended by the ASX Corporate
Governance Councils Principles
of Corporate Governance and Best
Practice Recommendations.

These statements have been reviewed
by ANZ’s Audit Committee and approvedby the Board. Our external auditor, KPMG,
has audited the Concise Financial Reportand related notes.

DIRECTORS’ REPORTCONSOLIDATED STATEMENT OFFINANCIAL PERFORMANCE
Financial performance refers to ANZ’s
profit for the year including: the sources of ANZ’s income split between
net interest income and other income;the expenses incurred by ANZ during
the year;

CONSOLIDATED STATEMENT OFFINANCIAL POSITION
This Statement is a summary of theassets, liabilities and shareholders’ equity
as at 30 September 2005. It shows what
ANZ as a Group owns as assets, what it
owes as liabilities and its net assets.
Net assets are equal to total shareholders’equity. The assets and liabilities are listed
in order of liquidity, with those assets
representing cash shown first and those
hardest to convert to cash, such as
premises, last.
The assets and liabilities of controlled
companies are included within
the consolidated results of the Group.

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

provision for doubtful debts; and

ANZ’s tax expense for the year.

The key figure to look at is “Net profit
attributable to shareholders of theCompany”, which is the profit for
the year.
The results of controlled companies
are included in the consolidated resultsof the Group.

NOTES TO THE CONCISE
FINANCIAL STATEMENTS

DIRECTORS’ DECLARATIONThis declaration contains the directors’
sign-off that the Concise Report complies
with Accounting Standards and provides
a true and fair view of the performanceand financial position of the Company.

AUDITOR’S REPORTThe independent audit report is theexternal and independent opinion on
the Concise Report.

SHAREHOLDER INFORMATION
Information is provided on ordinary
shares including the twenty largest
shareholders and the distribution ofshareholdings, and preferences shares– ANZ Stapled Exchangeable Preferred
Securities (ANZ StEPS) and Euro
Stapled Trust Securities. It also includes
on-market buy-back, details on voting
rights for ordinary shares and ANZ StEPS,
employee shareholder informationand Stock Exchanges, ANZ StEPS,
American Depositary Receipts andEuro Trust Securities.

GLOSSARY OF FINANCIAL TERMS
The glossary of financial terms on pages
94 and 95 contains an explanation of key
financial terms.

These notes provide details on thebasis of preparation of the Concise
Financial Report including details on
critical accounting policies, contingent
liabilities and assets, segment analysis
and dividends.

guide to concise report47

CORPORATE GOVERNANCE AT ANZ:A SOLID FOUNDATIONThis report sets out the Company’s corporate governance framework.
Further detail is contained on anz.com > about anz > corporate governance.
This website is regularly updated to ensure it reflects the Company’s mostrecent corporate governance information.

ASX CORPORATE GOVERNANCE TABLE
FOCUS & PRINCIPLECOMPLIANCE ( )1 Lay solid foundation for management and oversight
1.1

Formalise the functions reserved to the Boardand those delegated to management

6 Respect the rights of shareholders
Pgs 50, 51 

6.1

Design and disclose a communications strategy topromote effective communication with shareholders
and encourage effective participation
Pg 50 6.2

Request the external auditor to attend the AGM
and be available to answer shareholder questions
about the conduct of the audit and the preparationand content of the auditor’s report
Pg 50 2 Structure the board to add value

ANZ’s shareholders depend on the
Company’s Board for strategic guidance
and oversight of the Company as set out
in the Board Charter (anz.com > aboutanz > corporate governance). The Board
recognises its overriding responsibility
to act honestly, fairly, diligently andprogressively, in accordance with thelaw, in serving the interests of ANZ’sshareholders and all other stakeholders.
Corporate governance is an importantfocus for the Board. Good corporate
governance meets ethical and stewardship
responsibilities, and gives ANZ a strong
commercial advantage. It receives close
scrutiny, particularly since the establishmentof the Nominations, Governance & Corporate
Responsibility Committee in 2002.
ANZ shares and related securities arelisted on the Australian (ASX), the New
Zealand (NZX) and the New York (NYSE)
Stock Exchanges. ANZ must comply witha range of requirements including listing
requirements in Australia and New Zealandas well as overseas requirements such as
the US Sarbanes-Oxley Act of 2002, theUS Securities and Exchange Commission(SEC) rules and the New York Stock
Exchange listed company requirements.
In addition, ANZ strives to achieve bestpractice by taking into account the
principles and guidelines set out by the
ASX Corporate Governance Council, the
New Zealand Securities Commission and
the Combined Code of the United Kingdom.
In general, the Board seeks:
to embrace principles considered to be
best practice across the jurisdictions; to be an ‘early adopter’, where possible,
by complying before a published law orrecommendation takes effect; andto take an active role in discussions
regarding best practice in corporate
governance in Australia and overseas.


48

Consequently, the Board continuallymonitors governance developments
to align ANZ’s practices with bestpractice standards.
During the year, the Board worked closelywith management to review and update
ANZ policies and procedures in light ofchanges to regulations, legislation andguidelines across relevant jurisdictions.

ALIGNMENT WITH AUSTRALIANAND OVERSEAS CORPORATE
GOVERNANCE ISSUESINTERNATIONAL
 International Financial ReportingStandards – (IFRS) – ANZ has a formal
program to ensure that the Company isprepared to report, in compliance with
Australian equivalents to IFRS as issued
by the International Accounting Standards
Board, when its results for the half-year
ended 31 March 2006 are announced.
ANZ is on track to achieve thisreporting schedule.
 Basel II – For ANZ, the new Basel Accord
is scheduled to commence in 2006 for two
years of parallel running with the current
Capital Accord, prior to full implementationin January 2008. ANZ has established a
program to ensure the Company achieves
accreditation at the advanced levels forboth credit and operational risk under
Basel II. The program is on schedule witha number of Basel II requirements alreadyin place.

AUSTRALIAASX Corporate Governance Council –Principles of Good Corporate Governanceand Best Practice Recommendations –ANZ considers these principles importantand complies with the recommendations.


The Corporations Law Economic Reform
Program (Audit Reform and Corporate
Disclosure) Act 2004 – CLERP 9 Act –The legislation was passed by Parliamenton 25 June 2004. ANZ chose to be an‘earlier adopter’ of most of the newrequirements for the 2004 financial year.
For the 2005 financial year, ANZ complies
with all the new requirements.


NEW ZEALAND NZX Corporate Governance Rules andPrinciples – The NZX has introduced aCorporate Governance Best Practice Code.
As an overseas listed issuer on the NZX,ANZ is deemed to comply with the NZX
Listing Rules provided that it remains
listed on the ASX. A New Zealand Stock
Exchange disclosure is available on page 58.

OTHER JURISDICTIONS United States of America – As a‘foreign private issuer’ registered with
the SEC with securities listed on the NYSE,
ANZ is required to comply with certain
corporate governance requirements
contained in US securities laws, including
the Sarbanes-Oxley Act of 2002 andapplicable New York Stock Exchange (NYSE)
Listing Standards. Under the NYSE ListingStandards, ANZ is required to provide abrief description of the significant differences
between its corporate governance practices
and corporate governance requirementsfor US listed companies under the NYSE
Listing Standards. Information will be
provided in the Company’s US Form 20-F
2005 Annual Report and available on
ANZ’s website (anz.com > shareholders> financial information > annual reports).
 United Kingdom – ANZ monitorsdevelopments in the UK Combined Codethrough changes made by the Higgs
Report and the Smith Report.

2.1

The majority of the Board should be independent
directors

Pg 53 2.2

The chairperson should be an independent director

Pg 50 2.3

The roles of the Chairperson and Chief Executive
Officer should not be exercised by the same person

Pg 50 2.4

The Board should establish a nomination committee Pg 56 

2.5

Provide related disclosures

7 Recognise & manage risk



7.1

The Board or appropriate committees should establish
policies on risk oversight and management
Pg 56 7.2

The CEO and CFO should state to the Board in writing that
7.2.1 the statement given in accordance with bestpractice recommendation 4.1 is founded
on a sound system of risk management
and internal compliance and control
which implements the polices adopted
by the Board
Pgs 56, 57 

3 Promote ethical and responsible decision-making
3.1

Establish a code of conduct to guide the directors,
the CEO, the CFO and any other key executives as to:
3.1.1 the practices necessary to maintainconfidence in the company’s integrity Pgs 50, 57, 58 

7.2.2 the company’s risk management andinternal compliance and control systemis operating effectively and efficiently
in all material respects
Pgs 56, 57 

3.1.2 the responsibility and accountability of
individuals for reporting and investigating
reports of unethical practices
Pg 57, 58 
3.2

Disclose the policy concerning trading in company
securities by directors, officers and employees

3.3

Provide related disclosures

7.3
Pg 58 

Require the CEO and CFO to state in writing to theBoard that the company’s financial reports present
a true and fair view, in material respects, of thecompany’s condition and operational results andare in accordance with accounting standards

Pg 61 4.2

The board should establish an audit committee

Pg 55 4.3

Structure the audit committee so that it consists of> only non-executive directors> a majority of independent directors> an independent chairperson, who is not chairpersonof the Board> at least three members
Pg 55 4.4

The audit committee should have a formal charter

4.5

Provide related disclosures

8.1

5.2

Pg 55 Pg 54 9.1

Provide disclosure in relation to the company’s
remuneration policies to enable investors tounderstand the costs and benefits of the policies,
and the link between remuneration paid
to the directors and key executives andcorporate performancePgs 62 to 81 

9.2

The Board should establish a remunerationcommittee

9.3

Clearly distinguish the structure of non-executive
directors remuneration from that of executives Pgs 62 to 81 

9.4

Ensure that payment of equity-based executive
remuneration is made in accordance withthresholds set in plans approved byshareholders
Pgs 62 to 81 

9.5

Provide related disclosuresEstablish written policies and procedures designed
to ensure compliance with ASX Listing Rule disclosure
requirements and to ensure accountability at a senior
management level for that compliancePgs 49, 57, 58 
Provide related disclosures

Disclose the process for performance evaluationof the Board, its committees, individual directors
and key executives

9 Remunerate fairly and responsibly

5 Making timely and balanced disclosure
5.1

Provide related disclosures

8 Encourage enhanced performance

4 Safeguard integrity of financial reporting
4.1

COMPLIANCE ( )FOCUS & PRINCIPLE

Pgs 55, 56 



10 Recognise the legitimate interests of stakeholders
10.1 Establish and disclose a code of conduct
to guide compliance with legal and otherobligations to legitimate stakeholders

Pg 50, 57 

corporate governance

49

ETHICAL AND RESPONSIBLE
DECISION-MAKING
The Board encourages management topromote and maintain a culture within
ANZ which draws upon a set of unifying
values to guide the actions and decisionsof the Board and all employees (seeanz.com > sustainability > our values).
More than 21,000 ANZ employees haveparticipated in the Breakout culture
development program. The program
includes workshops to help staff to apply
values-based decision-making, balancing
the competing needs of staff, shareholders,customers and the community in theirroles and activities.
ANZ has three main codes of conduct
which also guide everyday businesspractice and decision-making throughout
the Group.
ANZ Directors’ Code of Conduct
sets ethical standards for the directors.
They are expected to pursue the highest
standards of ethical conduct in theinterests of shareholders and allother stakeholders.
ANZ (Employee) Code of Conduct sets
ethical standards for ANZ staff to embrace
and advocate. It establishes an environment
in which ANZ staff can excel, regardlessof race, religion, age, ability or gender.


ANZ Code of Conduct for Financial
Officers (adopted from G100 Code of
Conduct for Chief Financial Officers)
provides a practical guide for the CFO andfinancial staff in their everyday dealings
as to the standards of ethical behaviour
expected in the performance of theirduties in addition to the ANZ Employee
Code of Conduct.
Further details on these codes canbe found on anz.com > about anz >corporate governance.

COMMITMENT TOSHAREHOLDERCOMMUNICATION
Shareholders are the owners of ANZ,
and the Company’s stated aim is to‘perform and grow to create value forour shareholders’.
In order to vote on decisions about ANZ,
and to communicate views to the Company,
shareholders need an understanding of
the Company’s business operations
and performance.
ANZ encourages shareholders to take anactive interest in the Company. It seeks
to provide shareholders with quality
50

information in a timely fashion generally
through ANZ’s reporting of results, theCompany’s Annual Report, briefings, half
yearly newsletters and via its dedicatedshareholder site on anz.com.
ANZ strives for transparency in all its
business practices. The Company recognises
the impact of quality disclosure on thetrust and confidence of the shareholder,
the wider market and the community.
Should shareholders require any
information, they are also provided with
relevant contact details for ANZ andrelevant share registries in the half yearlyshareholder newsletters, the Annual
Report (under Information forshareholders) and anz.com.

CONTINUOUS DISCLOSURE
It has long been ANZ’s practice torelease all price-sensitive information
as required under the ASX listing rules
in a timely manner:
to all relevant stock exchanges on which
ANZ’s securities are listed; and to the market and community generally
through ANZ’s media releases, website
and other appropriate channels.
ANZ-related releases are posted on
relevant stock exchange websites andon anz.com > about anz > corporate
governance > continuous disclosure.

Through ANZ’s Continuous Disclosure
Policy (see page 58 and anz.com > aboutanz > corporate governance) the Company
demonstrates its commitment to continuous
disclosure. The policy reflects relevant
obligations under applicable stock
exchange listing rules and legislation.
For reporting purposes, price-sensitive
information is information that areasonable person would expect to havea material effect on the price or value of
ANZ’s securities.
Designated disclosure officers have
responsibility for reviewing proposed
disclosures and making decisions inrelation to what information can be or
should be disclosed to the market. All ANZ
staff are required to inform a disclosure
officer regarding any potentiallyprice-sensitive information concerning
ANZ as soon as they become aware of it.

UPHOLDING SHAREHOLDER
RIGHTSANZ upholds shareholder rights
and provides shareholders withthe opportunity to be involved inshareholder meetings.

To allow as many shareholders as possible
to have an opportunity to attend a meeting,
ANZ rotates shareholder meetings aroundregional capital cities. Webcast technology
has been introduced which makes it
possible to ‘attend’ presentations – tolisten to the speakers and simultaneously
view presentations over the internet.
Further details on meetings andpresentations held throughout thisfinancial year are available on anz.com> shareholders > presentations.
Prior to the Annual General Meeting,shareholders are encouraged to submit
any questions they have for the Chairman
or Chief Executive Officer to enable key
common themes to be considered.
The external auditor is present at ANZ
Annual General Meetings and available toanswer shareholder questions. The auditor
can respond on any business item thatconcerns them in their capacity as auditor.
Shareholders have the right to vote on
various resolutions related to Company
matters. If shareholders are unable toattend a meeting they can submit theirproxies via post or electronically throughanz.com. Where votes are taken on a poll,
ANZ appoints an independent party toverify the results, which are reported
to the ASX and posted on anz.com.

BOARD RESPONSIBILITY AND
DELEGATION OF AUTHORITY
The Board is responsible to shareholders
for the governance of the Group, andoversees its operations and financial
performance. To this end, it sets thestrategic direction and financial objectives,and monitors operational performance.
It also monitors compliance in terms of
ethical and efficiency standards andregulatory requirements. The Board also
appoints the Chief Executive Officer andregularly reviews his performance.
The ANZ Board is chaired by anon-executive independent director.
Its structure provides for a division of
responsibility between the Chairman
and the Chief Executive Officer. Thisis supported by the ANZ Board Charter(anz.com > about ANZ > corporate
governance) which states that the
Chairman must be an independent
non-executive director and that the
majority of the Board must comprise
independent non-executive directors.
The Board Charter clearly sets out theBoard’s purpose, powers, and specificresponsibilities. The business of the Bankis managed under the direction of theBoard. The Board delegates to the Chief
Executive Officer and through him, toother senior management, the authority
and responsibility for managing theeveryday affairs of the Company.
The Board monitors management andperformance on behalf of shareholders.

ROLE OF THE CHAIRMAN
The Chairman, a non-executive director,
plays an important leadership role with
ANZ and is involved in: chairing meetings of shareholders andBoard meetings;
 monitoring the performance of the Boardand the mix of skills and effectiveness of
individual contributions;
 maintaining on going dialogue with theChief Executive Officer and appropriate
mentoring and guidance;overseeing Board review processes; and

on going mentoring of individual directors.

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

BOARD COMPOSITION,
SELECTION AND APPOINTMENT
The Board strives to achieve a balanceof skills, knowledge, experience andperspective among its directors. Details
regarding the skills, experience, expertiseof each director in office at the date of thisConcise Annual Report can be found on
pages 51 to 53.
The Nominations, Governance &Corporate Responsibility Committee is
responsible for the nominations process
which includes a regular review of board
composition and succession for the Board
including the Chairman (anz.com > aboutanz > corporate governance).
Once a director is selected, there areseveral key elements relating to theappointment process including:Formalising the appointment – Eachdirector receives correspondence andrelated information setting out the
Directors’ Code of Conduct, 3-yearrotation, re-election procedures,
length of service, Board compositionand nomination process, performance
evaluation, directors’ fees, directors’dealings in shares, disclosure of interests,
conflict of interest policy and procedures,
outside board and other appointments aswell as insurance and related procedures.
Receipt of appointment-related
documents including:

Director Handbook – Each director receives
a handbook which outlines directors’
principal obligations, Company policies,
charters and processes as well as Board
specific procedures. It also sets out
details of scheduled Board andCommittee meetings.
Director’s Deed – Each director signs
the Deed which covers a number ofissues including indemnity, directors’
and officers’ liability insurance, theright to obtain independent advice
and the requirements concerning
confidential information.
Undertaking induction training –New directors take part in a formal
induction program which ensures they
have dedicated sessions with ANZ
directors, executives and other key
staff members regarding ANZ’s values
and culture, the Group’s governanceframework, financial management
and business operations. Specific topics
covered during these sessions include the
Directors’ Code of Conduct and Directorrelated policies, Board and Committee
principles, processes and key issues,
financial and audit issues such asaccounting standards and taxation,
governance issues including current andemerging legislation and regulations, risk
management and compliance framework
as well as people capital issues. Insight
into the business units is provided in
one-on-one sessions with eachbusiness head.
In addition, each new Committee member
participates in Committee-specificeducational sessions with the relevantCommittee chairman and ANZ executives.
Adherence to Directors’ Code of Conduct– As presented earlier, this code sets outthat directors will pursue the highest
standards of ethical conduct.
Meeting share qualification –Non-executive directors are required toaccumulate a holding in shares in the
Company that is equivalent to at least
100% of a non-executive director’s basefee and 200% of this fee for the Chairman.
Election at next Annual General Meeting
The ANZ Constitution and the Corporations
Act 2001 both permit the Board to appointa person to be a director of ANZ at any
time, but that person must seek election
by shareholders at the next Annual
General Meeting.


DIRECTORSMR CB GOODE, AC
b com (hons) (melb), mba (columbia university,
new york), hon lld (melb), hon lld (monash)

Chairman
Independent Non-Executive Director
Non-executive director since July 1991.
Mr Goode was appointed Chairman inAugust 1995 and is an ex-officio memberof all Board Committees.
Experience and expertise
Mr Goode has a background in the financeindustry and has been a professional
non-executive director since 1989. Hebrings a wide range of skills and significant
experience of the finance industry to hisrole as Chairman of the Board.
Current directorships
Chairman: Woodside Petroleum Limited(Director from 1988), Australian United
Investment Company Limited (Director
from 1990), Diversified United Investment
Limited (Director from 1991), and The Ian
Potter Foundation Ltd (Director from 1987).
Director: Singapore Airlines Limited(from 1999).
Age 67. Residence Melbourne.
MR J McFARLANE
ma, mba

Chief Executive Officer
Chief Executive Officer since October
1997. Mr McFarlane is also a Director of
ANZ National Bank Limited in New Zealand.
Experience and expertise
Mr McFarlane brings broad leadership,
management and banking skills following
a 30-year career in banking. Mr McFarlane
is a former Group Executive Director,
Standard Chartered Plc, Head of Citibank,
United Kingdom and Managing Director,
Citicorp Investment Bank Ltd.
Current directorships
Director: Financial Markets Foundation
for Children (from 1999), AustralianBusiness Arts Foundation (from 2000)
and International Monetary Conference(from 1997, including term as President).
Member: Foreign Affairs Council (from2005), Business Regulation Advisory
Group (from 2002), Financial Literacy
Foundation Advisory Board (from 2005),
the Council of the Australian Bankers
Association (from 1997, including a term
as Chairman) and the Asia BusinessCouncil (from 2004).
Former directorships
Former Director: Business Council ofAustralia (1999–2003) and Australian
Graduate School of Management Ltd(1999–2003), London Stock Exchange

corporate governance51

(1989–1991), Auditing Practices Board(1991–1997), The Securities Association(1989–1990), Capital Radio Plc(1995–1998), Financial Law Panel(1994–1999) and Cranfield School ofManagement (1992–1996).

Former directorships
Former Director: TransAlta Corporation(Canada) (2000–2003).

2001), Australia Council for the Arts (from2002), and Sydney Grammar School Trust(from 1993).

Age 64. Residence Wellington, New Zealand.

Chancellor: University of New South Wales(from 2005).

MR J K ELLIS

Director: The Westfield Group (from 1985).

Age 58. Residence Melbourne.

ma (oxon), faicd, hon fie aust, faus imm, ftse,
hon dr eng (cqu)DR G J CLARK

Independent Non-Executive Director
Chairman of the Risk Management
Committee

phd, bsc (hons)

Independent Non-Executive Director
Chairman of Technology Committee
Non-executive director since February
2004. Dr Clark is a member of theNominations, Governance & Corporate
Responsibility Committee.
Experience and expertise
Dr Clark is Principal of Clark CapitalPartners, a US-based firm that advises
internationally on technology and thetechnology market place. Previously heheld senior executive positions in IBM,News Corporation and Loral Space andCommunications. He brings to the Board
international business experience and a
distinguished career in micro-electronics,
computing and communications.
Current directorships
Director: James Hardie Industries NV(from 2002).

Non-executive director since October 1995.
Mr Ellis is a member of the Audit Committee.
Experience and expertise
A trained engineer, Mr Ellis brings to theBoard his analytical skills together withhis practical understanding of operational
issues, investments and acquisitions
across a range of sectors including natural
resources, manufacturing, biotechnology
and education.
Current directorships
Chairman: Pacifica Group Limited (Director
from 1999), National Occupational Health& Safety Commission (Director from 2003),
Future Directions International Pty Ltd(from 2003) and Landcare Australia Limited(from 2004).
Chancellor: Monash University(from 1999).

Former directorships
Former Director: Digex (2000–2002)
and Acton Semiconductor Pty Limited(2001–2005).

Director: GroPep Limited (from 2000).

Age 62. Based in New York, United Statesof America but also resides in Sydney.

Former directorships
Former Chairman: Black Range Minerals
Limited (2000–2004).

DR R S DEANE

Former Director: Australian Minerals& Energy Environment Foundation(1999–2003).

phd, b com (hons), fca, fcis, fnzim

Independent Non-Executive Director
Chairman of ANZ National Bank Limitedin New ZealandNon-executive director since September
1994. Dr Deane is a member of theCompensation & Human Resources
Committee and the Technology Committee.
Experience and expertise
Dr Deane has skills and experience
across a variety of sectors including
government, banking and finance,
economics, telecommunications,and also with charitable andcultural organisations.
Current directorships
Chairman: Telecom Corporation of New
Zealand Limited (Director from 1992,
CEO 1992–1999), Fletcher Building
Limited (from 2001), Te Papa Tongarewa(Museum of New Zealand) (from 2000), and
New Zealand Seed Fund Management
Limited (from 2000).
Director: Woolworths Limited (from 2000).

52

Member: Australia-Japan Foundation(from 1999).

Age 68. Residence Melbourne.
MR D M GONSKI, AO
b com, llb, s.i.a. (aff), faicd, fcpa

Independent Non-Executive Director
Chairman of the Nominations, Governance& Corporate Responsibility Committee
Non-executive director since February
2002. Mr Gonski is a member of the Risk
Management Committee.
Experience and expertise
A lawyer, Mr Gonski has a broad
experience across business, the law andinvestment banking. He also brings to hisrole on the Board an appreciation for thecommunity through his work in the artsand the not-for-profit sector.
Current directorships
Chairman: Coca Cola Amatil Limited(Director from 1997), the Investec Groupin Australia (including Investec Wentworth
Private Equity Pty Limited) (Director fromPresident: Board of Trustees of Art Galleryof NSW (from 1997).
Former directorships
Former Chairman: Morgan Stanley
Australia Limited (1999–2002), andNational Institute of Dramatic Art(2001–2005).
Former Director: John Fairfax Holdings
Limited (1993–2005) and ING Australia
Limited (2002–2005).

MR D E MEIKLEJOHN
b com, dip. ed, fcpa, faicd, faim

Independent Non-Executive Director
Chairman of the Audit Committee
Non-executive director since October
2004. Mr Meiklejohn is a member of theNominations, Governance & Corporate
Responsibility Committee.
Experience and expertise
Mr Meiklejohn has a strong background in
finance and accounting. He also brings to
the Board his experience across a numberof directorships of major Australiancompanies spanning a range of industries.
Current directorships
Chairman: PaperlinX Limited (from 1999).

Age 52. Residence Sydney.

Director: Coca-Cola Amatil Limited(from 2005).

MS M A JACKSON, AC

Vice President: Melbourne Cricket Club
(from 1987).

b ec, mba, hon lld, faicd, fca

Independent Non-Executive Director
Chairman of the Compensation & Human
Resources Committee
Non-executive director since March
1994. Ms Jackson is a member of the
Audit Committee.
Experience and expertise
A Chartered Accountant, with significant
financial expertise, Ms Jackson has broad
industrial experience including her
involvement in transportation, mining, themedia, manufacturing and insurance. This
expertise coupled with her work in healthand education contribute to her role on
the Board.
Current directorships
Chairman: Qantas Airways Limited(Director from 1992) and Co-Chairmanof Department of Foreign Affairs & Trade
Australia NZ Leadership Forum (from 2003).
Director: Billabong International Limited(from 2000) and Howard Florey Instituteof Experimental Physiology and Medicine(from 1998).
Member: Australia-Japan Foundation(from 2002).
Former directorships
Former Deputy Chairman: Southcorp
Limited (2004–2005) and People Telecom
Limited (2000–2002).
Former Director: John Fairfax Holdings
Limited (2003–2004).
Former Member: Brain Research Institute(1999–2004).
Former Partner: Consulting Division of
KPMG Peat Marwick (1991–1992).
Age 52. Residence Melbourne.

Former directorships
Former Chairman: SPC Ardmona Limited(2002–2005) and former Deputy Chairman
of GasNet Australia Limited (2001–2004).
Former Director: WMC Resources Limited(2002–2005) and OneSteel Limited(2000–2005).
Age 63. Residence Melbourne.
MR J P MORSCHEL
dipqs, faim

Independent Non-Executive Director
Non-executive director since October
2004. Mr Morschel is a member ofthe Risk Management Committee andthe Compensation & Human
Resources Committee.
Experience and expertise
Mr Morschel has a strong background inbanking and financial services, and brings
the experience of being a director of major
Australian and international companies.
Current directorships
Chairman: Rinker Group Limited (from 2003).
Director: Singapore Telecommunications
Limited (from 2001), Tenix Pty Limited(from 1998) and Gifford Communications
Pty Limited (from 2000).
Former directorships
Former Director: Rio Tinto Plc (1998–2005),
Rio Tinto Limited (1998–2005), CSR
Limited (1996–2003) and Leighton
Holdings Limited (2001–2004).
Age 62. Residence Sydney.

INDEPENDENCE AND
MATERIALITY

ANZ’s website (anz.com > about anz >corporate governance)

Under its Charter, a majority of
non-executive directors on the ANZ Board
must satisfy ANZ’s criteria for independence.
The Board Charter sets out independence
parameters in order to establish whether
a non-executive director may have arelationship with ANZ which could (orcould be perceived to) impede theirdecision-making.

The Board examined acquirer relationships
associated with each director and
immediate family members in respectof the level of lending and whether ANZ
is the sole lender, the credit rating andwhether the account is in order. Due toprivacy regulations, ANZ is unable todisclose details of acquirer relationships
associated with each director. The Board
concluded that there was no suchsituation which would impact ona director’s independence.

Directors are required to seek Board
approval before accepting other Board
appointments or appointments to charitableor other committees. In addition, directors
are required to inform the Company of
appointments or retirement fromexternal organisations.
In the 2005 financial year, the Board
reviewed its criteria for independence
in respect of the requirements in the
ASX Corporate Governance Council’s Best
Practice Recommendations, NZX and NYSE
Corporate Governance Standards, and the
US Sarbanes-Oxley Act of 2002. The
Board adopted standards for determining
non-executive director independence bothfor members of the Board and the Audit
Committee (some jurisdictions apply
different tests for the assessment of Audit
Committee independence). The criteria
are more rigid than those set in mostjurisdictions including criteria stipulated
specifically for audit committees.
The Board applies the following standard
in making its determination as to theexistence of a material relationship –a relationship with ANZ is material if
a reasonable person in the position ofa non-executive director of ANZ would
expect there to be a real and sensible
possibility that it would influencea director’s mind in:making decisions on matters likely
to come regularly before the Board or
its committees;

objectively assessing information andadvice given by management;setting policy for general application
across ANZ; andgenerally, carrying out the performanceof his or her role as director.


At its July 2005 meeting, the Board
considered each director’s independence
and in each case concluded that theindependence criteria were met by
all non-executive directors.
The independence criteria and processused by the Board in its determinationof director independence are detailed on

The Board also examined supplier
relationships associated with eachdirector and immediate family members
in respect of the value of the relationshipto the supplier, the service or productprovided and its value as well as otherrelevant information. It noted several
director associations as follows: Dr Deane is Chairman of Telecom
New Zealand Ltd. ANZ acquires
communication services from Telecom
New Zealand for the Company’s New
Zealand operations.
 Mr Gonski is a director of Westfield
Holdings Ltd. ANZ leases properties
from Westfield for its branch networkin Australia.
 Ms Jackson is Chairman of Qantas
Airways Limited. ANZ has commercial
relationships with Qantas as a partner inthe co-branded ANZ Frequent Flyer Visa
Cards, as a lessor of airport terminal
properties in Australia and New Zealandfor ANZ automatic teller machines (ATMs),
and as an acquirer of travel services for
ANZ people.

In each case, the Board concluded thathaving regard to the nature and value ofthe commercial relationship and themateriality criteria described above, eachof Dr Deane, Mr Gonski and Ms Jackson
is independent.
Directors do not participate in any
decisions regarding transactions withorganisations which they are associatedas acquirer or supplier (see Conflict ofInterest on page 54). Directors’ biographies
on pages 51 to 53 and on anz.com > aboutanz > corporate governance highlight theirassociations outside of ANZ.
It is the Board’s view that length ofservice is not a disabling criterion
affecting a director’s independence.
On the contrary, length of service greaterthan 10 years is seen as beneficial in
a complex organisation that is subject
to significant economic cycles.

corporate governance

53

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

TENURE AND RETIREMENTANZ’s Constitution provides that at least
one-third (or the nearest whole number)of directors must retire at each annual
general meeting, but are eligible forre-election at that meeting.
An appointee who is filling a casualvacancy has to stand for election at thefirst Annual General Meeting after their
appointment. This requirement does not
apply to the Chief Executive Officer, or any
director retiring at that meeting in any event.
It is Board policy that directors appointed
since July 1993 will, except in unusual
circumstances, retire after 15 years ofservices as a director of ANZ.
During 2005, Mr Dahlsen and Dr Scottretired from the Board. Mr Dahlsen was
Chairman of the Audit Committee(replaced by Mr Meiklejohn) and
Dr Scott was Chairman of the Nominations,
Governance & Corporate Responsibility
Committee (replaced by Mr Gonski).
During their tenure, they made significant
contributions to ANZ as Board members
as well as Committee Chairmen.

PERFORMANCE EVALUATIONS
Performance evaluations are conductedinternally and cover the Board,
each non-executive director andBoard Committees.
The framework used to assess the
directors is based on the expectation they
are performing their duties in a manner
which should create and continue to build
sustainable value for shareholders, andin accordance with the duties andobligations imposed upon them by
the ANZ Constitution and the law.
The performance criteria take into accounteach director’s contribution to:
the charting of direction, strategy andfinancial objectives for ANZ;

 the monitoring of compliancewith regulatory requirements andethical standards;

the monitoring and assessing ofmanagement performance in achieving
strategies and budgets approved by
the Board; the setting of criteria for, and evaluationof, the Chief Executive Officer’s
performance; and the regular and continuing review
of executive succession planning andexecutive development activities.

Board and non-executive performance
evaluations are conducted in two ways:

BOARD COMMITTEESANZ directors take part in a rangeof training and continuing education
programs. In addition to a formal
induction program (see page 51),
continuing education sessions are held
throughout the year focusing on a rangeof topics including People Capital issues,
emerging economic topics, technicaldevelopments, pending legislation,accounting standards, taxation, risk
management and corporate governance.

Each of the five main Committees iscomprised solely of independent directors,
has its own Charter and has the power toinitiate any special investigations it deems
necessary. Committee membership isreviewed annually. Membership criteria are
based on a director’s skills and experience,as well as his/her ability to add value tothe Committee. Board Committee
attendance is contained on page 41.

Directors also receive a quarterly
newsletter designed to keep them abreastof matters relating to their duties andresponsibilities as directors and officers.

Annual review – On an annual basis,or more frequently if appropriate, theChairman has a one-on-one meeting witheach director specifically addressing theperformance criteria including compliancewith the Directors’ Code of Conduct. In
addition, they discuss the effectiveness of
the Board and related issues including theBoard’s oversight and contribution to theCompany, Board discussion (including
the performance of the non-executive
directors and the Chairman), Board
memberships, Committees, and otherrelevant issues. They also discuss theperformance of the Board against its
Charter and goals set for the year. The
Chairman provides a report to the Boardon the outcome of these meetings.

In addition to formal Board-wide
workshops, each Committee conducts
its own continuing education sessions.
Internal and/or external experts areengaged to conduct all education sessions.

In addition, each director also completes
a questionnaire and returns this to the
Chairman of the Nominations, Governance& Corporate Responsibility Committee.
The Committee Chairman presents thesefindings to the Board.

Over and above the issue of
independence, each director has acontinuing responsibility to determine
whether he or she has a potential or
actual conflict of interest in relation to
any material matter which comes before
the Board. Such a situation may arise
from external associations, interests or
personal relationships which might affect,
or be seen potentially to affect, thedirector’s position to act in the bestinterest of ANZ.

The outcome of the 2004 annual review
led to several Board and Committee
related changes during this financial
year. Firstly, there was an expansion of
responsibility and change of name for the
Nominations, Governance & Corporate
Responsibility Committee. To provide
greater focus on technology and technology
risk, the Technology Committee wasestablished (see page 56).
Re-election statement – Directors whennominating for re-election are required tosubmit a written or oral statement to theBoard setting out the reasons why theyseek re-election. In the director’s absence,
the Board evaluates this statement (having
regard to the performance criteria) when it
considers whether to endorse the relevant
director’s re-election.
Each Board committee conducts aself-evaluation at least annually(see page 55).

54

CONTINUING EDUCATION

Directors also receive regular business
unit briefings at each Board meeting.
These briefings provide directors withan insight into each area of the Company,
in particular, performance, key issues,
risks and strategy for growth. In addition,
directors participate in business unit site
visits which provide them with theopportunity to meet with staff
and customers.

CONFLICT OF INTEREST

Under the Director’s Disclosure of Interest
Policy and Policy for Handling Conflicts ofInterest (see page 58 and anz.com > aboutanz > corporate governance), a director
may not exercise any influence over the
Board if a potential conflict of interest
exists. The process set out is such thata director may not receive relevant Board
papers, may not be present for Board
deliberations on the subject, and may not
vote on any related Board resolutions.
These matters, should they occur, arerecorded in the Board minutes.

the Audit Committees of subsidiarycompanies such as ANZ National Bank;The Chairman is an ex-officio memberof all Committees. The Chief Executive
Officer, Mr McFarlane, is invited to attend
Committee meetings, as appropriate. Hispresence is not automatic, however, andhe does not attend any meeting where his
remuneration is considered or discussed.
Non-executive directors may attend any
meeting of a Committee on a subject
where they have a special interest.
Committee performance self-evaluations
are conducted annually to review
performance against its Charter and goals
set for the year. The suitability of theCharter and any areas for improvement
are also assessed. The review and statedobjectives for the new financial year are
submitted to the full Board for discussion
and approval.
A copy of each Committee Charter andStanding Rules applicable to eachcommittee can be found on our website atanz.com > about anz > corporate governance.
The Audit Committee is responsible foroversight and monitoring of: the Company’s financial reporting
principles and policies, controls
and procedures;
 the work of Group (Internal) Audit
which reports directly and solely to the
Chairman of the Audit Committee (refer
to Group (Internal) Audit on page 57 formore information);

the integrity of the Company’s financial
statements and prudential returns; andcompliance with regulatory requirements
and independent audit thereof.


The Audit Committee is also responsible for:the appointment, evaluation andoversight of the external auditor;

compensation of the external auditors; andwhere appropriate, replacement of theexternal auditor.


Under the Committee Charter, all membersof the Audit Committee must be financiallyliterate and that at least one member of
the Committee be a “financial expert” asdefined in the US Sarbanes-Oxley Act.
Mr Meiklejohn and Ms Jackson were
designated as the Audit Committee’s‘financial experts’ for this purpose for the2005 financial year. Refer to pages 52
and 53 for their qualifications.
The Audit Committee meets with theexternal auditor without management
being present. The Chairman of the Audit
Committee meets separately and regularly
with the Group General Manager (Internal)
Audit and the external auditor.
Some 2005 financial year activities
included:
Monitoring the work of Group (Internal)
Audit – During the year, the Committee
received regular comprehensive reports
on Group (Internal) Audit covering its
activities, governance, staff, customers,
quality and management. In addition,
the Chairman of the Audit Committee
attended a number of senior Group(Internal) Audit team meetings and theteam conference. He also took part insmall group discussions with the Group(Internal) Audit staff.
 Review of the transition to International
Financial Reporting Standards (IFRS)– The Group is required to report inaccordance with these standards forthe 2006 financial year. The Committeemonitored the Group’s preparations
for transition to the new standards
including staff education and skill
enhancement, systems modifications,
new systems development and financial
reporting changes.
 Oversight of ANZ National Bank Limited
integration – the Committee monitored
a number of major related initiatives
during the year including the successful
integration of a number of key
financial systems.

The Compensation & Human Resources
Committee is responsible forrecommendations to the Board in respectof the Group’s compensation program
including any equity-based programs.
It also evaluates the performance of andapproves the compensation for the senior
executive officers and Board appointees(including the Chief Executive Officer)
and approves compensation levels
and policy guidelines.
Some 2005 financial year activities
included: Planning for Directors’ Retirement
Scheme closure – The Committee reviewed
the scheme, considered alternative
approaches taking into account bestpractice and has overseen the planningfor the closure of the scheme on
30 September 2005.
 Introduction of shareholding guidelines– To ensure strong alignment between
non-executive directors, the Chief
Executive Officer, senior executives andshareholders, the Committee monitored
the development and implementationof shareholding guidelines.

ANZ BOARD COMMITTEE MEMBERSHIPS from 1 October 2004 – 30 September 2005

Audit

Compensation &Human Resources

Nominations,
Governance & Corporate
Responsibility

Risk Management

Technology(commenced 21 Feb 2005)

David Meiklejohn FE, C

Margaret Jackson C

David Gonski C

Jerry Ellis C

Gregory Clark C
Roderick Deane
Charles Goode(ex-Officio)

Chairman from 3 Feb 2005

Chairman from 23 Apr 2005

Margaret Jackson FE
Jerry Ellis

Roderick DeaneJohn MorschelGregory Clark
David Meiklejohn

David Gonski
John MorschelCharles Goode(ex-Officio)
John Dahlsen C

Charles Goode(ex-Officio)

Charles Goode(ex-Officio)
Brian Scott C

Charles Goode(ex-Officio)
Roderick Deane

retired 23 Apr 2005

retired from RMC on 28 Feb 2005
(following Dr Deane joining
the Technology Committee)

retired 3 Feb 2005

C – Chairman, FE – Financial Expert (for the purposes of the US Sarbanes-Oxley Act requirements)

corporate governance55 Revision of remuneration principles
and processes – A review of ANZ’scompensation program was undertaken
during the year which included
extensive consultation with key
shareholders and their advisers. As
a result, changes were made to the
executive remuneration structure.
 Review of the succession plan –The Committee conducted reviews of
the current succession plans covering the
replacement of the CEO, CEO’s direct
reports and other business-critical roles.

The Nominations, Governance &Corporate Responsibility Committee
identifies and recommends prospective
Board members and succession planningfor the Chairman, recommends processes
for Board performance review, corporate
governance principles and practices andmonitors the direction and control ofcorporate responsibility for ANZ.
Some 2005 financial year activities
included:
 Widening scope – In recognitionof ANZ’s commitment to corporate
responsibility, the Committee expanded
its scope to include this area of focus.
This commitment was also reflectedin changes made to the Directors’ andEmployees’ Codes of Conduct and theCharters for the Board and the Committee.
 Monitoring changes to domestic andoverseas legislation and regulations –The Committee received regular updates
on changes to relevant legislation andregulations and considered potential
impacts on ANZ’s customers, staff,
operations and the community.

Refining Board performance evaluation
processes – Procedures for Board
performance assessment were reviewed.
The Committee recommended to the Board
the adoption of a mixed-methods approach,where directors take part in an interview
and complete a detailed questionnaire.


The Risk Management Committee is
responsible for the review of risk in all
aspects of the business. It is responsible
for overseeing, monitoring and reviewing
the Group’s risk management principles
and policies, strategies, processes andcontrols including credit, market, balance
sheet, operational risk and compliance. It
may approve credit transactions and othermatters beyond the approval discretion of
executive management.
Some 2005 financial year activities
included:Examination of risk culture – The
Committee reviewed the Group’s risk
56

culture with the objective of ensuring thecorrect balance between risk and reward.
This resulted in further alignment of Risk
to the divisions as well as the revision ofseveral risk policies.
 Oversight of Basel II – The Groupis preparing for the new Basel Accord,scheduled to commence in 2006 for two
years of parallel running with the current
capital Accord, prior to full implementationin January 2008. The Committeemonitored the Group’s preparation fortransition to the new Accord including
the accreditation submission. In addition,
the Committee took part in a dedicatedBasel II education forum.

Monitoring of emerging risks – During
the year, the Committee received regular
reports on emerging or future risks andmanagement’s responses necessary toensure timely and necessary mitigation.


Newly established in 2005, the Technology
Committee assists the Board of Directors
in the effective discharge of its
responsibilities in relation to technology
related matters. The Committee is
responsible for the oversight and evaluationof new projects in technology above$50 million and security issues relevant to
ANZ’s technology processes and systems.
It is also responsible for the review andapproval of management’s recommendations
for long-term technology planning and theoverall framework for the managementof technology risk.
Some 2005 financial year activities
included:
Review of technology systems –To enhance understanding of the Group’ssystems, the Committee took part in site
visits of key operations and partner
facilities. In addition, the Committee
received several reports on technology
systems and reviewed futuretechnology strategy.
Oversight of information security –The key drivers of information security
were reviewed by the Committee as well
as monitoring of emerging technology
risks and management’s responses
necessary to ensure proper mitigation.
 Monitoring of New Zealand systems
integration – The Committee received
updates on the New Zealand technology
initiatives and overall integration.

ADDITIONAL COMMITTEESIn addition to the five main Board
Committees, the Board has constituteda Shares Committee and an Executive
Committee to assist in carrying out
its functions.

The Executive Committee has the fullpower of the Board and is convened asnecessary between regularly scheduled
Board meetings. The Board also forms anddelegates authority to ad hoc Committeesof the Board as and when needed to carryout its functions. The Shares Committee
has the power to administer ANZ’s
Employee Share Plan and Employee
Share Option Plan.

DIRECTORS’ MEETINGS
The number of Board meetings andCommittee meetings held during the year
ended September 30, 2005 and attended
by each director are set out in the tableon page 41.

ROLE OF COMPANY SECRETARY
The Board is responsible for theappointment of ANZ’s Company Secretaries.
Currently there are three people appointed
as Company Secretary. For management
and corporate governance purposes thefollowing structure operates.
The Group General Counsel and Company
Secretary is normally in attendance at all
Board and Committee meetings. He
prepares minutes and provides legal
advice to the Board if and when required.
He works closely with the Chair of theNominations and Corporate GovernanceCommittee to develop and maintain ANZ’s
corporate governance principles. He is
responsible to the Board for the Company
Secretary’s Office function.
The Company Secretary is responsiblefor day-to-day operations of the Company
Secretary’s Office including lodgementswith relevant stock exchanges, themanagement of dividend payments, andthe relationship with the share registry
provider. The Chief Financial Officer isalso appointed as Company Secretary.
Profiles of ANZ’s Company Secretaries canbe found in the Directors’ Report on page 60.

RISK MANAGEMENT ANDCOMPLIANCE
ANZ’s business controls are governed byan ongoing focus on risk and complianceissues within the framework of theCompany’s overall strategy. ANZ hasestablished a comprehensive risk andcompliance management framework
to ensure best practice alignment.
In terms of risk management andcompliance, the Board is principally
responsible for establishing risk tolerance,
approving related strategies and policies,
monitoring and assessing the activities ofmanagement, overseeing policy complianceand the effectiveness of the risk systems
and policies to meet the requirements of
all regulations and the interests ofshareholders, customers and staff.
The Risk Management Committee of
the Board oversees the Group’s risk
management policies and controls, andmay approve credit transactions and othermatters beyond the approval discretionof executive management.
On a day-to-day basis, the various risks
inherent in ANZ’s operations are managed
by both Group Risk Management andeach business unit.
For further information on risk management,
please see page 15 and visit anz.com> about anz > corporate governance.

conforms to international auditing
standards. Audit results also influence
incentive compensation of business heads.

management level or higher, must be
pre-approved by the Chairman of the
Audit Committee.

Group (Internal) Audit plays an activerole in ensuring compliance with therequirements of supervisory regulatory
authorities. Group (Internal) Audit also
works collaboratively with the external
auditor to ensure a comprehensive
audit scope.

As disclosed in the 2004 Annual
Report, the SEC commenced an inquiry
into non-audit services provided by ANZ’sauditor, KPMG. ANZ has provided theinformation requested by the SEC. Thisinquiry has not concluded. Should the SEC
determine that services provided by KPMG
did not comply with the US auditor
independence rules, the SEC may seek
sanctions, the nature and amount of which
are not known. Whilst ANZ cannot predict
the outcome of the inquiry, based on
information currently available, ANZ does
not believe it will have a material adverse
effect on the Company.

The Audit Committee plays an activerole in reviewing significant issues arisingfrom internal audits conducted by Group(Internal) Audit. There is a robust process
for ensuring prompt resolution of audit
issues, which includes monthly reviewsof progress by the Chief Executive Officer
and the Chairman of the Audit Committee.

FINANCIAL CONTROLSThe Audit Committee also receives formal
reports on significant issues to ensure thatany remedial action is undertaken promptly.

As previously noted, the Audit Committeeof the Board oversees the Company’s
financial reporting policies and controls,
integrity of the Company’s financial
statements, the work of Group (Internal)
Audit, the Audit Committees of thesubsidiary companies, prudential
returns and compliance with related
regulatory requirements.

External audit
The external auditor’s role is to provide
reasonable assurance that ANZ’s financial
reports are true and fair and free frommaterial misstatement. The external auditor
also performs independent audits inaccordance with Australian and UnitedStates Auditing Standards.

To further strengthen controls andprocedures, the Audit Committee agreed
that the Company undertake a Group-wide
program focusing on Section 404 of the
US Sarbanes-Oxley Act of 2002. The
program is being instituted at bothCompany and business unit level and isoverseen by a program steering committee.
ANZ expects to be in full compliance withthis section of the Act during the financial
year to 30 September 2006, ANZ’s firstreporting date under the Act.

The Audit Committee oversees ANZ’s
Policy on Relationship with External
Auditor. Under the policy, the Audit
Committee is responsible for theappointment (subject to ratification byshareholders), compensation, retention
and oversight of the external auditor.
The policy also stipulates that the
Audit Committee:
pre-approves all audit and non-audit
services;regularly reviews the independenceof the external auditor;


AUDIT
Group (Internal) Audit
Group (Internal) Audit provides independent
assurance that the design and operationof the risk and control framework acrossthe Group is effective. It operates undera Charter from the Audit Committee thatgives it unrestricted access to review allactivities of the Group. The Group General
Manager (Internal) Audit reports to the
Chairman of the Audit Committee.
The Audit Committee monitors theperformance of Group (Internal) Audit and
the Group General Manager (Internal) Audit.
A risk-based audit approach is used toensure that the higher risk activities ineach business are audited each year. All
audits are conducted in a manner that

evaluates the effectiveness of theexternal auditor.


Details of non-audit services are in the
Directors’ Report on pages 60 to 61.
In addition, ANZ requires a two-year period
before any former partner or employee ofthe external auditor is appointed as adirector or senior executive of ANZ.
The lead partner position of the external
auditor is required to rotate off the ANZ
audit after five years and cannot return fora further five years. Other senior audit
staff are required to rotate off after amaximum of seven years.
Any potential appointments of ex-partners
or ex-employees of the external auditor
to the ANZ finance staff, at senior

CODES OF CONDUCTAND POLICIESBelow is an overview of ANZ’s key codesand policies which apply to directors andemployees. Summaries of these and othercompany policies can be found on
anz.com > about anz > corporate governance.
 Codes of Conduct for Directors and for
Employees – These policies set out the
ethical standards to which directors andemployees are expected to adhere. The
Codes require that directors and employees
adhere to the law, disclose any relevantinterests, and act honestly and ethicallyin all their dealings. The codes also cover
the confidentiality of information, limitson acceptance of gifts or entertainmentand on use of ANZ goods, services andfacilities. Key contact – Group GeneralCounsel and Company Secretary.
 Code of Conduct for Financial Officers– (adopted from the Group of 100 Codeof Conduct for CFOs and Senior Financial
Officers). The Code requires that chief
financial officers and other finance staff
influencing financial performance adhere
to principles of honesty and integrity,
respect confidentiality of information,
declare conflicts of interest, maintaintransparency in reporting, exercise
diligence and good faith, ensure soundinternal controls and set a standard forother financial professionals. Key contact– Chairman of the Audit Committee.

Critical Accounting Policies – Detailsof the critical accounting policies andany changes in accounting policies madesince the date of the 2004 Annual Report
are set out on page 85 in this Concise
Annual Report and in the 2005 Financial
Report. Key contact – Group General
Manager Finance.



corporate governance57

 Directors’ Disclosure of Interests
Policy and Policy for Handling Conflictsof Interests – The Board has adopted apolicy on disclosure of interests requiringthat directors disclose certain interests,
and actual or potential conflicts of interest
are addressed. Details of directors’
dealings with ANZ are set out in the
Financial Report. Key contact – Group
General Counsel and Company Secretary.
 Employee Indemnity Policy – This policy
provides that the Group will indemnify
employees against any liability that they
incur in carrying out their role subject tomeeting certain requirements. Further
details on this policy and on indemnities
given to certain employees can befound on page 61 of this Concise Annual
Report. Key contact – General Manager
Operational and Technology Risk.

Continuous Disclosure Policy – ANZ iscommitted to achieving best practice inthe area of continuous disclosure. The
policy is designed to ensure that there
is full and timely disclosure of ANZ’s
activities to shareholders and the market.
The policy requires that information
disclosed to the relevant stock exchanges
is placed on ANZ’s website. Key contacts– Head of Investor Relations, Head of Media
Relations and Group General Counsel andCompany Secretary.


Policy on the Prevention of Money
Laundering, Criminal and Terrorist
Financing – This policy covers Anti-Money
Laundering and Anti-Terrorism laws andregulations. It sets out principles related
to identification and record keeping
procedures, the need for staff awarenessand related training, and annual
requirements for independent testing andcompliance reporting. The policy is aimed
at ensuring that ANZ is able to protect its
reputation, integrity, assets, liabilities andshareholder funds. Key contacts – General
Manager Operational and Technology Risk
and General Manager Group Compliance.
 Policy on Relationship with External
Auditor – The Board and the Audit
Committee’s policy on audit andnon-audit services regulates theaudit-related and non-audit services
that may be conducted by ANZ’s external
auditor. It sets in place a formal approval
process regarding the provision of audit
and non-audit services. This approval
process is the responsibility of the Audit
Committee. In addition it sets out therotation requirements for the lead partnerand other members of the audit team,and processes related to the potential
appointment of ex-partners or
ex-employees of the external auditor. Key
contact – Chairman of the Audit Committee.

58 Securities Trading Policy – The policy
prohibits trading in ANZ securities or the
securities of other companies for all
persons – directors, employees, contractors
and consultants engaged by ANZ – whoare aware of unpublished price-sensitive
information. In addition, the policy
specifically prohibits restricted employees
trading in ANZ securities during ‘blackout
periods’, which are the six weeks leading
up to the day following the half-yearly andannual results announcements. Key contact– General Manager Group Compliance.

Whistleblower Policy (formerly known
as Serious Complaints Policy) – The
Whistleblower Process is an additional
mechanism by which ANZ staff, contractors
and consultants may voice any concerns
they may have regarding any malpracticeor impropriety that they find within ANZ.
It requires that protection be given to
employees against dismissal or penalty
as a result of disclosing concerns in goodfaith. Key contacts – Group General
Manager (Internal) Audit and Group
General Counsel and Company Secretary.

 New Zealand Policies – Recognising
the importance of ANZ’s presence in
New Zealand and the requirements of theReserve Bank of New Zealand, the ANZ
National Bank Limited Board reviews andapproves all ANZ Group governance andrisk management polices before they are
adopted by ANZ National Bank to ensurethat they meet all New Zealand regulatory
requirements. Key contact – GeneralCounsel and Company Secretary
ANZ National Bank Limited.

NEW ZEALAND STOCKEXCHANGE DISCLOSURE
The following statement is included
as required under New Zealand Stock
Exchange (NZX) Listing Rules which
requires ANZ, as an ‘Overseas Listed
Issuer’, to include a statement of thematerial differences between Australian
Stock Exchange (ASX) corporate governancerules and principles and those applicable
under the NZX Corporate Governance Best
Practice Code (NZX Code). Irrespective ofany differences, ANZ complies with allapplicable governance principles andrequirements both in Australia and
New Zealand.
The ASX corporate governance rules andprinciples specifically address corporate
governance matters in relation to risk
management, internal controls andstakeholder interests which are notspecifically addressed in the NZX Code.
The ASX principles and rules also provide
greater emphasis on the need for issuers

to disclose internal corporate governancepolicies and procedures to shareholders(including for example disclosure of insider
trading policies, performance measurement
procedures and remuneration policies).
The ASX corporate governance principles
and rules require ANZ to comply or
explain any non-compliance, while someof the NZX governance requirements
are mandatory under the NZX Listing
Rules. For example, the ASX Corporate
Governance Council Principles of Good
Corporate Governance and Best Practice
Recommendations suggest that a majorityof directors be independent. The NZX
Listing Rules require that at least two
directors be independent (or if there are
8 or more directors, at least 3 or one-third
be independent).
In New Zealand, governance rules
concerning the independence of auditors
are covered in the NZX Code. In Australia,
they are covered more extensively in the
Corporations Act 2001 and the ASX
Corporate Governance Council Principles
of Good Corporate Governance and Best
Practice Recommendations. There arealso some differences in other aspects ofcorporate regulation generally in Australia
and New Zealand. For example:
 ASX Listing Rules do not require
shareholder approval of majortransactions to the same extent required
by NZX Listing Rules.

The ASX related party transaction
provisions require shareholder approval
only for related party acquisitions or
dispositions of assets exceeding 5% ofshareholders equity. Whereas the NZX
related party transaction provisions
require shareholder approval for related
party acquisitions, dispositions and othertransactions exceeding 5% of the issuer’s
average market capitalisation, and foran additional category of service
arrangements where the threshold is anannual gross cost of 0.5% of the issuer’s
average market capitalisation.
Restrictions on buy-backs and financial
assistance covered by the NZX Listing
Rules are not addressed in the ASX Listing
Rules, but are covered in Australia’s
Corporations Act. Details on ANZ’s corporate
governance are set out on pages 48 to 58.


POLITICAL DONATIONSIn the year to 30 September 2005, ANZ
donated $100,000 to the Liberal Party
and $50,000 to the Australian Labor Party.

DIRECTORS’ REPORTThe directors present their report together with the Concise Financial Report ofthe consolidated entity (the Group), being Australia and New Zealand Banking
Group Limited (the Company) and its controlled entities, for the year ended
30 September 2005 and the Auditors’ Report thereon. The information isprovided in conformity with the Corporations Act 2001.

PRINCIPAL ACTIVITIESThe principal activities of the Groupduring the year were general banking,mortgage lending, leasing, hire purchaseand general finance, international andinvestment banking, nominee and custodian
services, executor and trustee services
and life insurance and funds management
activities and through ANZ National Bank
Limited and the joint ventures ING
Australia Limited (INGA) and ING New
Zealand Limited (INGNZ).
There has been no significant change in
the nature of the principal activities of theGroup during the financial year.
At 30 September 2005, the Group had
1,223 points of representation.

RESULT Profit – Consolidated net profit after
income tax attributable to shareholdersof the Company was $3,018 million, an
increase of 7% over the prior year.
 Net loans and advances increased by 13%
from $204,962 million to $230,952 million,
primarily due to mortgage and business
lending in Australia and New Zealand.

Deposits and other borrowings
increased by 10% from $168,557 million
to $185,693 million primarily to fundasset growth.
Bonds and notes increased by 42% from$27,602 million to $39,073 million tofund asset growth.
The provision for doubtful debts has
been determined using economic loss
provisioning (ELP) and is based on theGroup’s risk management models.


The ELP charge reduced 8% from$632 million to $580 million. The current
charge reflects a decrease in the ELP rateover the year in line with the Group’s
improving risk-profile. This is as a resultof growth in low risk domestic assets(principally mortgages), strong underlying

credit quality, the continued risk reduction
strategy covering the overseas portfolio andhigh-risk assets, and the cessation of the
Corporate Centre charge for offshore losses.
ANZ’s ELP models recognise that thegeneral provision balance must be regularly
reviewed, and in rare situations, increased
or decreased to cover unusual events.
The balance is at an appropriate level.
Net specific provisions of $357 million,
were down $86 million compared to theprior year. Gross non-accrual loans
decreased to $642 million, down from$829 million. The reductions reflect thestrategy to reduce risk in both overseas
portfolios (not including New Zealand)
and high-risk domestic portfolios. The
reductions also reflect strong credit
quality, favourable economic conditions
and fewer large single name defaults.
Further details are contained in the
Chief Financial Officer’s review on pages
10 to 15 of this Concise Annual Report.

STATE OF AFFAIRSIn the directors’ opinion, there havebeen no significant changes in the stateof affairs of the Group during the financial
year, other than:
Reduction of risk – The Company has
been actively reducing the overall risk
profile of the Group. Net specific provisionsof $357 million were down 19% comparedto the prior year. This was below the amountaccrued for doubtful debts of $580 million
in the Statement of Financial Performance.


New joint venture – In September 2005,
ANZ National Bank Limited formed a joint
venture with ING Insurance International
Limited covering life insurance and wealthmanagement activities in New Zealand.
The joint venture is called ING (NZ) Holdings
Limited and ANZ National Bank Limited will
have a 49% interest. ANZ National Bank
Limited sold a controlling interest in NBNZ
Life Insurance Limited into this joint venture.
 New capital instrument – In December
2004, the Group raised $871 million
through the issuance of a €500 million
Euro Trust Securities into the European
market. The instrument is similar in
structure to the Group’s existing
Australian (ANZ StEPS) and US Trust
Securities. Further details are containedin the 2005 Financial Report.

Further review of matters affecting theGroup’s state of affairs are also containedin this Concise Annual Report under the
Chairman’s Report on page 8, the Chief
Executive Officer’s Report on page 9 and
the Chief Financial Officer’s Review on
pages 10 to 15.

DIVIDENDS
The directors propose that a final
fully franked dividend of 59 cents per
fully paid ordinary share be paid on
16 December 2005. The proposed
payment amounts to approximately$1,077 million.
During the financial year, the following
fully franked dividends were paid on fully
paid ordinary shares:

Type

Final 2004
Interim 2005

Cents
per
share

Amountbeforebonus
options$m

Date ofpayment

54
51

983
930

17 December 2004
1 July 2005

REVIEW OF OPERATIONS
A review of the operations of the Groupduring the financial year and the resultsof those operations, including an assessmentof the financial position and businessstrategies of the Group are contained in
the Chairman’s Report, the Chief Executive
Officer’s Report, and the Chief Financial
Officer’s Review and our Business
Performance on pages 8, 9, 10 to 15
and 16 to 31 respectively of thisConcise Annual Report.
directors’ report59EVENTS SINCE THE END
OF THE FINANCIAL YEAR
No matter or circumstance has arisen
between 30 September 2005 and thedate of this report that has significantly
affected or may significantly affect theoperations of the Group in future financial
years, the results of those operations or
the state of affairs of the Group in futurefinancial years.

FUTURE DEVELOPMENTS
Details of likely developments in theoperations of the Group and its prospects
in future financial years are containedin this Concise Annual Report under the
Chairman’s Report and the Chief Executive
Officer’s Report. In the opinion of thedirectors, disclosure of any further
information would be likely to result in
unreasonable prejudice to the Group.

ENVIRONMENTAL REGULATIONANZ recognises our obligation to ourstakeholders – customers, shareholders,
staff and the community – to operate ina way that advances sustainability andmitigates our environmental impact. Ourcommitment to improve our environmental
performance is integral to our “making
a sustainable contribution to society”.
We acknowledge that we have an impact
on the environment:
directly through the conduct of ourbusiness operations; and

indirectly through the products andservices we provide to our customers.
As such, ANZ has established an
Environment Charter, strategy and internal
responsibilities for reducing the impact of
our operations and business activities
on the environment can be found on
pages 32 to 37.
The operations of the Group are notsubject to any particular or significant
environmental regulation under a lawof the Commonwealth or of a State or
Territory. However, the operations of
the Group may become subject toenvironmental regulation when enforcing
securities over land. ANZ has developed
policies to manage such environmental
risks. Having made due enquiry, to thebest of our knowledge no member of theGroup has incurred any environmental
liability during the year.

DIRECTORS’ QUALIFICATIONS,EXPERIENCE AND SPECIALRESPONSIBILITIESAt 1 October 2004, the Board wascomprised of 10 non-executive directors
and one executive director, the Chief
Executive Officer. Two non-executive
directors retired during the year:
Mr John Dahlsen on 3 February 2005
and Dr Brian Scott on 23 April 2005.
At the date of this report, the Board
comprises 8 non-executive directors who
have a diversity of business and community
experience and one executive director, theChief Executive Officer, who has extensive
banking experience. The names of directors
and details of their qualifications andexperience is contained on pages 51 to 53 of
this Concise Annual Report and on anz.com.
Details of the number of Board andBoard Committee meetings held during
the year, directors’ attendance at thosemeetings, and details of directors’ special
responsibilities are shown on pages
40 to 41 of this Concise Annual Report.
For those directors in office at
30 September 2005, details of thedirectorships of other listed companies
held by each director in the 3 years prior
to the end of the 2005 financial year are
listed in this Concise Annual Report on
pages 51 to 53.

John Priestley, BEc, LLB, ANZ
Company Secretary.


Mr Priestley, a qualified lawyer, joined
ANZ in 2004. Prior to ANZ, he had a longcareer with the Mayne Group and held
positions which included responsibility forthe legal, company secretarial, complianceand insurance functions. He is a memberof Chartered Secretaries Australia andalso a member of Chartered Secretaries
Australia’s Legislation Review Committee.

NON-AUDIT SERVICES
The Company’s Relationship with
External Auditor Policy states that theexternal auditor may not provide services
that are perceived to be in conflict withthe role of the auditor. These include
consulting advice and sub-contracting ofoperational activities normally undertaken
by management, and engagements where
the auditor may ultimately be required
to express an opinion on its own work.
Specifically the policy:

COMPANY SECRETARIES’QUALIFICATIONS AND
EXPERIENCE
Currently there are three people appointed
as Company Secretary of the Company.
Details of their roles are contained on page
56. Their qualifications are as follows:
Tim L’Estrange, LLB, BCom, ANZ Group
General Counsel and Company Secretary

Mr L’Estrange has a long-standing legal
career spanning 26 years. He hassignificant experience in corporate law.
Mr L’Estrange joined ANZ in 2003. Prior to
ANZ, he worked closely with boards andsenior management of major corporations,banks and financial institutions.
Mr L’Estrange was the National Executive
Partner, Litigation and Dispute Resolutionof Allens Arthur Robinson and a memberof the Board of Management of that firm.
He was also Managing Partner of Allen
Allen & Hemsley. Mr L’Estrange is also amember of Chartered Secretaries Australia.
 Peter Marriott, BEc (Hons),
ANZ Chief Financial Officer.

Mr Marriott has been involved in thefinance industry for more than 20 years.
60

Mr Marriott joined ANZ in 1993. Prior tohis career at ANZ, Mr Marriott was a Partnerin the Melbourne office of the then KPMG
Peat Marwick. He is a Fellow of a numberof professional organisations including
the Institute of Chartered Accountantsin Australia and the Australian Instituteof Banking and Finance. He is also a
Member of the Australian Institute ofCompany Directors.

limits the non-audit services that may
be provided;

requires that audit and permitted
non-audit services must be pre-approvedby the Audit Committee, or pre-approvedby the Chairman of the Audit Committee
and notified to the Audit Committee; andrequires the external auditor to notcommence an audit engagement for theGroup, until the Group has confirmed thatthe engagement has been pre-approved.


The Audit Committee has reviewed asummary of non-audit services provided
by the external auditor for 2005, and has
confirmed that the provision of non-audit
services for 2005 is compatible with thegeneral standard of independence for
auditors imposed by the Corporations
Act 2001. This has been formally advised
to the Board of Directors.
The external auditor has confirmed to the
Audit Committee that they have compliedwith the Company’s Relationship with
External Auditor Policy on the provision of
non-audit services by the external auditor
for 2005.

The non-audit services supplied by
the Group’s external auditor, KPMG, andthe amount paid or payable by type of
non-audit service during the year to
30 September 2005 are as follows:
Amount paid/
payable $’000s
Non-audit service

2005

Co-sourced internal–
audit services1
Tax compliance andrelated services
4
Controls and process reviews 254
NBNZ due diligence oversight–
US Sarbanes-Oxley andInternational Financial
Reporting Standards
matters
426
Accounting advice
74
Securitisation review–
Review of capitalraising circulars
253
Sustainability review
82
Other
26
Total
1,119

2004

1,260
628
249
420

335
170
128
292
–
157
3,639

1 The work performed by KPMG was independent of theexternal audit team and management

The directors are satisfied that the provisionof non-audit services by the external
auditor during the year to 30 September
2005 is compatible with the generalstandard of independence for auditors
imposed by the Corporations Act 2001.

AUDITOR’S INDEPENDENCE
DECLARATIONThe Company’s lead auditor has provided
a written declaration under Section 307C
of the Corporations Act 2001 that to thebest of his knowledge and belief, there
have been no contraventions of:
the auditor independence requirementsof the Corporations Act 2001 in relation
to the audit; and the applicable Australian code ofprofessional conduct in relation to the audit.

A copy of this declaration is detailed on
page 90 of this Concise Annual Report.
This declaration is incorporated in andforms part of this Directors’ Report.

DIRECTORS AND OFFICERS WHO
WERE PREVIOUSLY PARTNERS
OF THE AUDITOR
The following persons are currently
directors or officers of the Group and werepartners of KPMG at a time when KPMG
was the auditor of Australia and New
Zealand Banking Group Limited: Ms Margaret Jackson, Non-executive
director (left KPMG in June 1992); andMr Peter Marriott, Chief Financial Officer(left KPMG in January 1993).
CEO/CFO DECLARATIONThe Chief Executive Officer and the Chief
Financial Officer have given a declaration
to the Board concerning the Group’s
financial statements under section
295A(2) of the Corporations Act 2001 andrecommendations 4.1 and 7.2 of the ASX
Corporate Governance Council Principles
of Good Corporate Governance and Best
Practice Recommendations.

DIRECTORS’ AND OFFICERS’INDEMNITY
The Company’s Constitution (Rule 11.1)
permits the Company to indemnify each
officer or employee of the Company
against liabilities (so far as may bepermitted under the Corporations Act 2001)
incurred in the execution and dischargeof the officer’s or employee’s duties.
It is the Company’s policy that its
employees should not incur any liability
for acting in the course of their employment
legally, within the policies of the Company
and provided they act in good faith.
Under the policy, the Company will
indemnify employees against any liability
they incur in carrying out their role. The
indemnity protects employees and former
employees who incur a liability whenacting as an employee, trustee or officerof the Company, or a subsidiary of theCompany at the request of the Company.
The indemnity is subject to the
Corporations Act 2001 and will not apply
in respect of any liability arising from:a claim by the Company;a claim by a related body corporate;a lack of good faith;illegal or dishonest conduct; or

non-compliance with the Company’s
policies or discretions.


The Company has entered into indemnity
Deeds with each of its directors, with certain
other officers of the Company, and withcertain employees and other individuals
who act as directors or officers of related
body corporates or of another company.
To the extent permitted by law, the Company
indemnifies the individual for all liabilities,
including costs, damages and expenses
incurred in their capacity as an officer ofthe company to which they have been
appointed. Some amendments to theseDeeds in favour of the Company’s directors
will be proposed to shareholders at theforthcoming Annual General Meeting. Further
details are contained in the Notice of Meeting.

The Company has indemnified thetrustees and former trustees of certain of
the Company’s superannuation funds anddirectors, former directors, officers andformer officers of trustees of various
Company sponsored superannuation
schemes in Australia. Under the relevant
Deeds of Indemnity, the Company must
indemnify each indemnified person if theassets of the relevant fund are insufficient
to cover any loss, damage, liability or cost
incurred by the indemnified person inconnection with the fund, being loss,
damage, liability or costs for which theindemnified person would have been
entitled to be indemnified out of theassets of the fund in accordance withthe trust deed and the Superannuation
Industry (Supervision) Act 1993. This
indemnity survives the terminationof the fund. Some of the indemnified
persons are or were directors or executive
officers of the Company.
The Company has also indemnified
certain employees of the Company, being
trustees and administrators of a trust
which is a subsidiary entity, from andagainst any loss, damage, liability, tax,
penalty, expense or claim of any kind or
nature arising out of or in connection withthe creation, operation or dissolution of
the trust, where they are acting in goodfaith and in a manner that they reasonably
believed to be within the scope of theauthority conferred by the trust.
Except for the above, neither the Company
nor any related body corporate of theCompany has indemnified or made anagreement to indemnify any person who
is or has been an officer or auditor of theCompany or of a related body corporate.
During the financial year, and again since
the end of the financial year, the Company
has paid a premium for an insurance
policy for the benefit of the directors,
secretaries, and senior managers of
the Company, and directors, secretaries
and senior managers of related bodies
corporate of the Company. In accordancewith common commercial practice, theinsurance policy prohibits disclosure of
the nature of the liability insured against
and the amount of the premium.

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

61

The Compensation & Human Resources Committee has responsibility for making recommendations to the Board for both director andexecutive remuneration and executive succession. On a number of occasions throughout the year, both the Compensation and Human
Resources Committee and management received external advice on matters relating to remuneration. The following advisors were used:
Hay Group, Blake Dawson Waldron, Freehills, PricewaterhouseCoopers, Mercer Finance & Risk Consulting and Ernst & Young. Refer to page
55 of the Corporate Governance Report for more details about the Committee’s role, and anz.com > about ANZ (listing at top of screen) >Corporate Governance > Board Related Charters for the charter which details the terms of reference under which the Committee operates.

REMUNERATION REPORTThis Remuneration Report details ANZ’s remuneration policies pertaining to directors and executives, the link between remuneration
outcomes and ANZ’s performance, and individual remuneration disclosures relating to remuneration and equity for ANZ’s directors and top
executives (as required by AASB 1046 and the Corporations Act 2001). The remuneration policies and practices detailed in this report have
evolved during the financial year as a result of market research and consultation with major shareholders and their advisors.

SECTION A. REMUNERATION TABLES

PRIMARY1
Cashsalary/fees

TABLE 1: DIRECTOR REMUNERATION
For the year ended 30 September 2005 detailsof the remuneration of the directors are set out below:

POST EMPLOYMENTEQUITY5

OTHER
Total7

Value of sharesacquired inlieu of cash
salary/fees2$

Associated entity
Board fees (cash)

Committee
fees(cash)

Value of sharesacquired in lieu 2,3ofcash incentive

Primary
total

Super
contributions

Retirement
benefit accrued4
during the year

Total
amortisation of
LTI shares

Total
amortisation of
LTI options$

Long service
leave accrued
duringthe year
$

$

$

$

$

$

$

$

$

$

$

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

2005
2004

79,41591,000n/an/a

420,585
338,000

–
–

–
–

n/a
n/a

500,000
429,000

11,723
11,297

243,284
99,586

n/a
n/a

n/a
n/a

–
–

755,007539,883

GJ Clark (Appointed February 2004)
Independent Non Executive Director

2005
2004

130,000
86,667

n/a
n/a

–
–

–
–

25,44010,834n/an/a155,440
97,501

11,723
7,597

50,18933,008

n/a
n/a

n/a
n/a

–
–

217,352
138,106

JC Dahlsen (Appointed May 1985; retired February 2005)
Independent Non Executive Director

2005
2004

44,417130,000

n/a
n/a

–
–

–
–

18,80965,050n/an/a63,226
195,050

4,423
11,296111,303
74,356

n/a
n/a

n/a
n/a

–
–

178,952
280,702

RS Deane (Appointed September 1994)
Independent Non Executive Director

2005
2004

130,000
130,000

n/a
n/a

–
–

122,3849
117,9589

17,61819,500n/an/a

270,002
267,458

11,723
10,321

49,16970,998

n/a
n/a

n/a
n/a

–
–

330,894348,777

JK Ellis (Appointed October 1995)
Independent Non Executive Director

2005
2004

103,000
103,000

n/a
n/a

27,00027,000––42,25052,250n/an/a172,250
182,250

11,723
11,297110,981
65,780

n/a
n/a

n/a
n/a

–
–

294,954259,327

DM Gonski (Appointed February 2002)
Independent Non Executive Director

2005
2004

88,970130,000

n/an/a

41,030–22,15050,15022,512
16,050n/an/a174,662
196,200

11,723
11,297104,001
67,227

n/a
n/a

n/a
n/a

–
–

290,386
274,724

MA Jackson (Appointed March 1994)
Independent Non Executive Director

2005
2004

130,000
130,000

n/a
n/a

–
–

–
–

42,25042,250n/an/a172,250
172,250

11,723
10,899122,008
56,352

n/a
n/a

n/a
n/a

–
–

305,981239,501

DE Meiklejohn (Appointed October 2004)
Independent Non Executive Director

2005
2004

130,000
–

n/a
n/a

–
–

–
–

31,027–n/an/a161,027–

11,723–64,781
–

n/a
n/a

n/a
n/a

–
–

237,531–

JP Morschel (Appointed October 2004)
Independent Non Executive Director

2005
2004

100,000–

n/a
n/a

30,000–––19,500–n/an/a149,500–

11,723–60,459
–

n/a
n/a

n/a
n/a

–
–

221,682–

BW Scott (Appointed August 1985; retired April 2005)
Independent Non Executive Director

2005
2004

72,857130,000

n/a
n/a

–
–

28,51624,38917,23430,750n/an/a118,607
185,139

6,803
11,297127,089
64,839

n/a
n/a

n/a
n/a

–
–

252,499
261,275

TOTAL OF NON-EXECUTIVE DIRECTORS

2005
200413

1,008,659
930,667n/a
n/a

518,615
365,000

173,050
192,497

236,640
236,684n/an/a

1,936,964
1,724,848

105,01085,301

1,043,264
532,146

n/a
n/a

n/a
n/a

–
–

3,085,238
2,342,295

2005
2004

44
43

31,242
78,211

1,882,896
1,882,831

–
–

–
–

2,100,004
1,850,006

4,014,186
3,811,091

417,00010
417,00010––

982,987–

1,791,7186
2,584,880

4,0311290,61911

7,209,922
6,903,590

2005
200413

1,008,703
930,710

31,242
78,2112,401,511
2,247,831

173,050
192,497

236,640
236,684

2,100,004
1,850,006

5,951,150
5,535,939

522,010502,301

1,043,264
532,146

982,987–

1,791,718
2,584,880

4,031
90,61910,295,160
9,245,885

Executive Director
J McFarlane (Appointed October 1997)8
Chief Executive Officer
TOTAL OF ALL DIRECTORSCOMMENTARY ON CHANGES BETWEEN
2004 AND 2005
Non-Executive Directors (NEDs)
Primary Total Remuneration has increased
by $212,114. This increase is as a result of:i) Timing differences between theappointment of DE Meiklejohn and
JP Morschel, and the retirement of
BW Scott and JC Dahlsen.
ii) Increase in Chairman’s fees of $71,000
in recognition of increased demands of therole, relativity to peers, and to maintainequitable relativity with other NEDs.
iii) The full year effect of the addition
of GJ Clark to the Board.

62

The Post-Employment Retirement Benefit
accrued during the year has increased by$511,120 from the previous period dueto the following:i) $95,286 resulting from fee increases
over the last 3 years being taken into
account for the purpose of the directors’
retirement benefits.
ii) $415,634 of this is due to amendments
made during the year to the individual
agreements with NEDs to make theformula for calculating the amount payable
under them consistent for all NEDs. In
some instances this has resulted in theamount accrued during the year being
increased to take account of the impactof the change to the formula on previous
years’ accrued benefits. In each caseunder the relevant agreement, themaximum amount that may be paid

to a NED as a retirement benefit is subject
to the limits in the Corporations Act.
Executive Director (Chief Executive Officer)
There was no change to J McFarlane’s fixed
remuneration which remained at $2,000,000,
including superannuation contributions.
His short-term incentive target for 2005 wasincreased to $2,000,000 (100% of his fixed
remuneration) in accordance with his contract
extension announced on 26 October 2004.
His actual payment was $2,100,000(compared to $1,850,000 in 2004) reflecting
the Board’s assessment of his performanceagainst agreed balanced scorecard
objectives which include ANZ’s financial
performance and its performance against
specified measures for shareholders,customers, staff and the community.

1 Non-monetary benefits for all directors are nil.
2 Shares acquired through participation in Directors’ Share Plan (relates to CEO only in relation to cash incentive, as NEDs do not participate in Short-Term Incentive arrangements).
Value reflects the price at which the shares were purchased on market (amortisation not applicable).
3 100% of the CEO’s cash incentive vested during the financial year.
4 Accrual relates to Directors’ Retirement Scheme. The following benefits were paid under the Directors’ Retirement Scheme to the following former directors: JC Dahlsen (retired 3 February 2005)– $513,668; BW Scott (retired 23 April 2005)– $516,214. If each of the current NEDs had ceased to be a director as at 30 September 2005, the following benefits would have been
payable under the Directors’ Retirement Scheme: CB Goode – $1,312,539; GJ Clark – $83,197; RS Deane – $693,285; JK Ellis – $523,039; DM Gonski – $249,445; MA Jackson – $487,022;
DE Meiklejohn – $64,781; JP Morschel – $60,459. The Directors’ Retirement Scheme will be discontinued effective 30 September 2005. Refer to section B2 for more information pertaining to
the Directors’ Retirement Scheme.
5 In accordance with the requirements of AASB1046A, the amortisation value includes a proportion of the fair value (taking into account market-related vesting conditions) of all equity that had not yet
fully vested as at the commencement of the financial year. It is assumed that 100% of the options will vest at the commencement of their exercise period (i.e. the shortest possible vesting period isassumed). The fair value is determined at grant date and is allocated on a straight-line basis over the expected vesting period. The fair value is determined using a binomial option-pricing model that is
explained in section F9. The amount included as remuneration is not related to nor indicative of the benefit (if any) that may ultimately be realised should the options become exercisable. For deferredshares, the fair value is the weighted average price of the Company’s shares traded on the ASX on the day the shares were granted.
6 Amortisation value of options as a percentage of his total remuneration (as shown in the Total column above) was 25% in 2005 (37% in 2004).
7 Amounts disclosed for remuneration of directors exclude insurance premiums paid by the consolidated entity in respect of directors’ and officers’ liability insurance contracts which cover current
and former directors and officers, including executive officers of the entity and directors, executive officers and secretaries of the controlled entities. The total premium, which cannot be disclosed
because of confidentiality requirements, has not been allocated to the individuals covered by the insurance policy as, based on all available information, the directors believe that no reasonablebasis for such allocation exists.
8 J McFarlane elected to use almost all his cash salary and incentive to purchase on market deferred shares under the Directors’ Share Plan.
9 Amounts paid in NZD are converted to AUD at an average rate for the year of 1.0847 (1.1254 in 2004).
10 Includes $300,000 additional employer contribution, agreed as part of contract extension announced 26 October 2004 (refer to section D2).
11 Relates to reimbursement to J McFarlane for the additional tax liability on his UK Pension Plan holdings, arising as a result of Australian Foreign Investment Fund rules, and J McFarlane’s continuing
Australian residency (in accordance with the contractual arrangements detailed in section D2).
12 Relates to professional services rendered in respect of taxation matters.
13 2004 aggregate amounts relate to those directors reported in 2004.

remuneration report63

TABLE 2: EXECUTIVE REMUNERATION
For the year ended 30 September 2005 details of the remuneration of the top seven executives (Specified Executives), other than the
Chief Executive Officer, are set out below and include the five most highly remunerated executives in the Company and the Group(as required under the Corporations Act 2001) and the top executives in the Group by authority (as required by AASB1046):

PRIMARY
Cashsalary/fees

POST EMPLOYMENT

Non monetary
benefits1

Total cash
short-term
Incentive2,3Primary
total

Super
contributions$

Long service
leave accrued
duringthe year
$

$

$

$

EQUITY5
Annualremuneration(Primary plus
Post-Employment)$

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

Total
amortisation ofother equity
allocations6$Grand total
remuneration7,10$Retirement
benefitaccrued during
year4
$

$

Specified Executives
Sir J Anderson8,9
Chief Executive & Director,
ANZ National Bank Ltd New Zealand

2005
2004

838,110
672,792––––

460,960
449,618

1,299,070
1,122,410

83,811
67,27933,36732,1601,416,248
1,221,849

–
–

–
–

–
–

477,452
219,168

1,893,700
1,441,017

Dr RJ Edgar
Chief Operating Officer

2005
2004

727,696
723,651

13,92856,21228,281
31,552800,000
393,000

1,569,905
1,204,415

46,80046,752

1,672
7,163

1,618,377
1,258,330

173,907
197,681555,470
342,662

264,095
256,110––

2,611,849
2,054,783

E Funke KupperGroup Managing Director Asia-Pacific

2005
2004

654,550
654,550

10,86010,846

7,277
7,277

770,000
385,500

1,442,687
1,058,173

40,95040,950––1,483,637
1,099,123

184,924232,208

221,068
232,024

239,523
333,500––

2,129,152
1,896,855

BC Hartzer
Group Managing Director Personal Banking

2005
2004

694,435
543,062

19,46915,69461,54257,091

1,080,000
424,000

1,855,446
1,039,847

46,80037,224––

1,902,246
1,077,071

149,259
201,364

237,943
192,239

282,929
298,814––2,572,377
1,769,488

GK Hodges
Group Managing Director Corporate

2005
2004

648,556
510,081

46,14039,006

11,465
17,357

863,000
343,000

1,569,161
909,444

40,83832,600

1,635
2,919

1,611,634
944,963

131,825
147,516

186,089
127,584

218,920
195,847––

2,148,468
1,415,910

PR Marriott
Chief Financial Officer

2005
2004

748,700
728,451

12,42229,098

7,277
7,277

920,000
482,000

1,688,399
1,246,826

46,80045,542––

1,735,199
1,292,368

208,525
243,435

295,175
276,714317,175
369,376––

2,556,074
2,181,893

S Targett9Group Managing Director Institutional

2005
2004

748,700
305,407

12,497
5,101

7,277
2,934

880,000
267,000

1,648,474
580,442

46,80018,976––

1,695,274
599,418––

40,544–39,059–789,238
188,0812,564,115
787,499

TOTAL

2005
2004

5,060,747
4,179,538

115,316
128,629

123,119
113,408

5,773,960
2,726,118

11,073,142
7,147,693

352,799
300,598

36,67442,27011,462,615
7,490,561

848,440
1,089,594

1,536,289
1,250,614

1,361,701
1,551,766

1,266,690
407,249

16,475,735
11,789,784

COMMENTARY ON CHANGES BETWEEN
2004 AND 2005iii) With the exception of Sir J Anderson,change in STI delivery to 100% cash in2005 versus 75% cash and 25% deferredshares (amortised over 3 years) for 2004.

Specified Executives
The differences in Total Remuneration
between 2004 and 2005 for Specified
Executives are as a result of the following:i) Total Employment Costs (TEC) or fixed
remuneration increases between 2004
and 2005 are in line with ANZ’s guiding
principles (refer to sections C1 and C3),and to reflect role changes for BC Hartzer;
increased responsibility for GK Hodges
and market pressures.
ii) Increase in target short-term incentive(STI) amounts (for all Specified Executives
except for Sir J Anderson), from 67% of
TEC to 100% of TEC in order to meetcompetitive pressures.

64iv) Sir J Anderson and S Targett commenced
part way through 2004, being 1 December
2003 and 5 May 2004 respectively.
v) Two of S Targett’s deferred share grants
fell into the 2005 financial year (refer
to footnote 6).
vi) 2004 aggregate amounts relate tothose Specified Executives reported in 2004.

1 Non monetary benefits provided to Specified Executives consist of salary packaged items such as car parking and novated lease motor vehicles.
2 Total cash incentive relates to the full incentive amount for the financial year ended 30 September 2005. A portion of the STI was delivered as deferred shares in 2004.
3 100% of the Specified Executives’ cash incentive vested to the person in the financial year.
4 Accrual relates to Retirement Allowance. As a result of being employed with ANZ prior to November 1992, RJ Edgar and GK Hodges are eligible to receive a Retirement Allowance on retirement,
retrenchment, death, or resignation for illness, incapacity or domestic reasons. The Retirement Allowance is calculated as follows: 3 months of notional salary (which is 65% of fixed remuneration)plus an additional 3% of notional salary for each year of full-time service above 10 years, less the total accrual value of long service leave (including taken and untaken).
5 In accordance with the requirements of AASB1046A, the amortisation value includes a proportion of the fair value (taking into account market-related vesting conditions) of all equity that had not yet
fully vested as at the commencement of the financial year. It is assumed that 100% of the options will vest at the commencement of their exercise period (i.e. the shortest possible vesting period isassumed) and that deferred shares will vest after 3 years. The fair value is determined at grant date and is allocated on a straight-line basis over the 3-year vesting period. For options, the fair value isdetermined using a Binomial Option Pricing model that is explained in section F9. The amount included as remuneration is not related to nor indicative of the benefit (if any) that may ultimately berealised should the options become exercisable. For deferred shares, the fair value is the weighted average price of the Company’s shares traded on the ASX on the day the shares were granted.
6 Amortisation of other equity allocations for Sir J Anderson relates to the granting of zero priced options (ZPO). ZPOs are granted as part of his employment contract. Refer to section E2 for further
details. Amortisation of other equity allocations for S Targett relates to the grant of deferred shares beginning on 11 May 2004 (four tranches to the value of $700,000 each to be issued at 6 monthintervals in May and November in 2004 and 2005, subject to Board approval and continued employment) and hurdled A options (refer to section F11.1 for performance hurdle details) to compensate
S Targett for the loss of access to equity as a result of his resignation from his previous employer.
7 Amounts disclosed for remuneration of Specified Executives exclude insurance premiums paid by the consolidated entity in respect of directors’ and officers’ liability insurance contracts which covercurrent and former directors and officers, including executive officers of the entity and directors, executive officers and secretaries of the controlled entities. The total premium, which cannot be
disclosed because of confidentiality requirements, has not been allocated to the individuals covered by the insurance policy as, based on all available information, the directors believe that noreasonable basis for such allocation exists.
8 Amounts paid in NZD are converted to AUD at an average rate for the year of 1.0847 (1.1254 in 2004).
9 Sir J Anderson was appointed 1 December 2003 (ie 2 months after the start of the 2004 financial year) and S Targett was appointed 5 May 2004 (ie 7 months after the start of the 2004 financial year).
10 Amortisation value of options as a percentage of grand total remuneration for the 2005 financial year was as follows: Sir J Anderson – 25% (15% in 2004); Dr RJ Edgar – 10% (12% in 2004);
E Funke Kupper – 11% (18% in 2004); BC Hartzer – 11% (17% in 2004); GK Hodges – 10% (14% in 2004); PR Marriott – 12% (17% in 2004); S Targett – 11% (12% in 2004).

remuneration report65

SECTION B. NON-EXECUTIVEDIRECTORS’ REMUNERATION
B1. NON-EXECUTIVE DIRECTORS’REMUNERATION POLICY
Non-executive Directors’ (NEDs) fees arereviewed annually and are determined by
the Board of Directors based on advice
from external advisors and with reference
to fees paid to other NEDs of comparable
companies. NEDs’ fees are within the
maximum aggregate limit agreed to byshareholders at the Annual General
Meeting held on 13 December 2002($2.5 million, excluding retirement
allowances and superannuation), andare set at levels that fairly represent the
responsibilities of, and the time spent by,
the NEDs on Group matters. NEDs receive
a fee for being a director of the Board,and additional fees for either chairing or
being a member of a committee. Work on
special committees may attract additional
fees of an amount considered appropriate
in the circumstances. An additional fee isalso paid if a NED serves as a director of
ANZ National Bank Limited, ING Australia
Ltd or Metrobank Card Corporation. NEDs
do not receive any performance/incentive
payments and are not eligible to participate
in any of the Group’s incentive arrangements.
The Chairman Fee was increased to$500,000 effective 1 October 2004 inrecognition of the demands of the role,market practice and in order to maintain
desired relativity with other directors. No
other adjustments were made to NED fees
for the year ending 30 September 2005.
The fee structure is illustrated inTable 3 below:

2004 Fee2005 Fee

Chairman$429,000
Non-Executive
Director$130,000$32,500
Committee Chair1
Committee Member1 $9,750$500,000$130,000$32,500$9,750

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

For details of remuneration paid to
directors for the year ended 30 September
2005, refer to Table 1 in section A of thisRemuneration Report.
NED Shareholding Guidelines
NEDs have agreed to accumulate ANZ
shares, over a five-year period, to thevalue of 100% (200% for Chairman) of
the base annual NED Fee and to maintain66

B2. NON-EXECUTIVE DIRECTORS’RETIREMENT POLICYAll NEDs participated in the ANZ Directors’
Retirement Scheme up to the year ended
30 September 2005. Under this scheme,
a lump-sum retirement benefit was payable
to NEDs upon their ceasing to be adirector. The lump-sum retirement benefit
payable where the NED held office for
8 years or more was equal to the total
remuneration (excluding retirement benefit
accrual) of the NED in respect of the 3 years
immediately preceding the NED ceasing to
be a NED. For periods of less than 8 years,
a proportionate part of such remuneration
was payable. The NEDs are not entitled tothe statutory entitlements of long service
leave and annual leave.
Consistent with Principle 9.3 of theAustralian Stock Exchange (ASX) Corporate
Governance Rules, which states that
NEDs should not be provided withretirement benefits other than statutory
superannuation, the ANZ Directors’
Retirement Scheme was closed effective
30 September 2005.
Accrued entitlements were fixed at
30 September 2005 and will be carriedforward to retirement, and collected by the
NED when they retire. The entitlements
may be carried forward as:
Cash Alternative: A cash payment, being
the entitlement accrued to 30 September
2005, plus escalation based on the 30 day
bank bill rate until retirement date; and/or

TABLE 3Role

this shareholding while a director of ANZ.
NEDs have agreed to apply up to 25% of
their base fee annually via the Director’s
Share Plan or other means, towards thepurchase of ANZ shares in order toachieve/ maintain the desired holding
level. This is a new guideline which wasapproved by the Board in September 2005.

Shares Alternative: A number of ANZshares purchased on market on 27 October2005 to the value of the accrued entitlement,
plus escalation based on the 30-day bankbill rate for the period 1 October 2005 to
26 October 2005 (subject to Shareholder
approval at the 2005 Annual General
Meeting). Shares will then be held in
ANZ Employee Share Trust for the benefitof the Director until retirement.



NEDs have been asked to nominate theproportion of their accrued entitlement tobe directed towards each alternative,
subject to shareholder approval.
Fees for NEDs will be increased by 27.5%
effective 1 October 2005 to compensate

for the removal of this contractual
benefit. This amount was determinedbased on an independent actuarial
valuation of the scheme by Mercer
Finance & Risk Consulting and advice
from expert remuneration consultants
PricewaterhouseCoopers. This increaseis also in line with market practice inrelation to fee increases due to theremoval of the Directors’ Retirement
Scheme, where increases have typicallyranged from 25% to 30%.
NED Fee Cap
There has been no increase in the NED
fee pool since 2002. Shareholder approval
will be sought at the 2005 Annual General
Meeting for an increase to the NED Fee
Cap by $500,000. This proposed increase
would take the maximum aggregate amountfrom $2.5m to $3.0m – an amount whichis considered necessary in order to: accommodate the fee adjustment tocompensate for the removal of the Directors’
Retirement Scheme (27.5%) – while thediscontinued retirement benefits under
the Constitution are outside the maximum
aggregate limit, the compensating
increase to fees will be within the limit;
 allow for annual adjustments in linewith market NED movements; andallow for the addition of another NED
in either 2006 or early 2007.


It is critical that the Company has thecapacity to pay adequate fees to NEDs inorder to attract and retain directors of thehighest calibre.

B3. DIRECTORS’ SHARE PLAN
The Directors’ Share Plan is available
to both non-executive and executive
directors. Directors may elect to forgo
remuneration to which they may haveotherwise become entitled and receive
shares to the value of the remuneration
forgone. Participation in the plan isvoluntary, except to the extent that the
NED Shareholding Guidelines must be met
and therefore the shares acquired are notsubject to performance conditions.
Shares acquired under the plan arepurchased on market and are held in
trust for up to 10 years. Shares are subject
to a minimum 1 year restriction, during
which the shares cannot be traded, andare subject to forfeiture for serious
misconduct. All costs associated withthe plan are met by the Company.

SECTION C. EXECUTIVEREMUNERATION STRUCTURE
C1. REMUNERATION GUIDING
PRINCIPLESANZ’s reward policy guides theCompensation & Human Resources
Committee and management in shaping
remuneration strategies and initiatives.
The following principles underpin
ANZ’s reward policy:
1. Focus on creating and enhancing value
for ANZ’s shareholders;
2. Differentiation of individual rewards
commensurate with contribution to overall
results and according to individual
accountability, performance and potential;
3. Significant emphasis on “at risk”
components of total rewards linked to theenhancement of shareholder value throughimprovements in Economic Value Added™
(EVA™); and4. The provision of a competitive reward
proposition to successfully attract, motivate
and retain the highest quality individuals
required to deliver ANZ’s business andgrowth strategies.
During 2005 a comprehensive review
of reward structures has been conductedagainst the backdrop of these principles
and against the Company’s growth strategy
and corporate governance principles. As
a result, a number of changes have beenmade. These changes are detailed in
section C4 of this Remuneration Report.
Shareholding Guidelines
Direct Reports to the CEO are expected toaccumulate ANZ shares, over a five year
period, to the value of 200% of their Total
Employment Cost (TEC) and to maintainthis shareholding while an executive ofANZ. Our next most senior executives are
expected to accumulate ANZ shares to thevalue of 100% of their TEC and to maintainthis shareholding while an executive ofANZ. This guideline was introduced inJune 2005. New executives will be
expected to accumulate the required
holdings within five years of appointment.

practicable, ANZ applies structures andopportunities on a consistent basis for
similar roles and levels. There is a strongemphasis on variable remuneration
opportunities with total employee
remuneration differentiated significantly
on the basis of performance.
The executive remuneration program(which includes the remuneration ofsenior managers and the company
secretaries) is designed to support the
reward principles detailed in section
C1, and to underpin the Company’s
growth strategy. This program aims todifferentiate remuneration on the basisof achievement against group, business
unit and individual performance targets
which are aligned to sustained growthin shareholder value using a balanced
scorecard approach.

Fixed remuneration is set around the
median of the market. STI and LTI
payments for on target performance arealso set at market median, however theplan design allows for the opportunity
to earn upper quartile total remuneration
for significant out performance, andsignificantly reduced payment forunderperformance. In this way the
remuneration structure is heavily weighted
towards “reward for performance”.

C3. FIXED REMUNERATION
For most executives, fixed remunerationconsists of what is referred to as Total
Employment Cost (TEC). TEC comprises
cash salary, a superannuation contribution,and the remainder as nominated benefits.
The types of benefits that can be packaged
by executives include novated car leases,
additional superannuation contributions,car parking, child care, laptops andcontributions towards the Employee Share
Save Scheme (see note 50 of the 2005
Financial Report for details of the Employee
Share Save Scheme).

The program comprises the following
components:
fixed remuneration component(TEC): salary, non-monetary benefits
and superannuation contributions(Refer to C3).
variable or “at risk” component(Refer to C4):
- Short-Term Incentive (STI); and- Long-Term Incentive (LTI).
The relative weighting of fixed andvariable components, for target
performance, is set according to thesize of the role and competitive market
in which the role operates, with theproportion of remuneration “at risk”
increasing for the most senior or complex
roles, or for those roles where there isstrong market pressure to provide greaterlevels of remuneration. Figure 1 below
shows the relative mix of Fixed, STI and
LTI at target payment levels.

To ensure fixed remuneration remains
competitive, the TEC component ofexecutive remuneration is reviewed
annually based on individual performanceand market data. ANZ operates with a
midpoint targeted to the market medianbeing paid in the finance industry in therelevant global markets in which ANZ
operates, and a range around thismidpoint. International remunerationlevels are considered in assessing market
competitiveness where an executive’s
primary place of residence is outside ofAustralia or New Zealand, in which casethe local market is considered.

FIGURE 1
Target Reward Mix

38%

38%

32%

48%

C2. REMUNERATION STRUCTURE
OVERVIEW
ANZ’s reward structures are designed tomeet the needs of ANZ’s specialised
business units as well as the markets inwhich they operate. As a result, the mix of
remuneration components can vary acrossthe organisation although, where

27%

63%
0

10

20

TEC% (fixed pay)
STI%
LTI%

30

40

50

60

70

80

90

24%

Specified Executives1

20%

Larger Senior Exec. Roles2

10%

Smaller Senior Exec. Roles2

100

1 Specified Executives’ reward mix pertains to Dr RJ Edgar, E Funke Kupper,
BC Hartzer, GK Hodges, PR Marriott and S Targett. Refer to E2 for composition of
Sir J Anderson’s remuneration.
2 The reward mix for larger senior executive roles and smaller senior executive roles
is based on average data.

remuneration report67C4. VARIABLE REMUNERATION
Variable remuneration forms a significant
part of executives’ potential remuneration,
providing an at-risk component that isdesigned to drive performance in both theshort-term (annually) and in the medium
and long-term (over 3 years or more).
The opportunities available to executives
under ANZ’s variable reward programs arecalibrated to reflect executives’ potential
impact on the business, to manage internal
relativities, and to ensure competitivenessin the relevant markets in which they operate.
Most executives participate in the
short-term incentive (STI) plan detailed in
section C4.1 and the long-term incentive(LTI) plan detailed in section C4.2, subject
to individual performance thresholds.
In some instances, customised STI plans
will exist for executives to ensure closeralignment of their rewards with businessobjectives and market practice. For example,
staff in ANZ’s Institutional Divisionparticipate in a customised incentive plan
more closely aligned with that market.
No executive, however, may participate
in more than one STI plan.
Equity allocated under ANZ incentive
schemes remain at risk until fully vested(in the case of Deferred Shares) or are
exercisable (in the case of options or
Performance Rights). As such, it is acondition of grant that no schemes areentered into that specifically protect theunvested value of shares, options andPerformance Rights allocated. Doing sowould constitute a breach of the grantconditions and would result in the forfeitureof the relevant shares or options.
C4.1 Short-Term Incentives
ANZ’s STI approach supports our strategic
objectives by providing rewards that are
significantly differentiated on the basis ofachievement against performance targets.
Most executives participate in the plan
explained below. All STI plans are reviewed
and approved by the Compensation &Human Resources Committee.
Determination of Award Levels
The size of the overall pool available eachyear is determined based on ANZ Group
performance against a balanced scorecardof financial and qualitative measures.
This pool is then distributed amongst
divisions and then individuals basedon relative performance.

68

Each executive has a target STI which
is determined according to seniority andmarket relativities. The size of the actual
STI payment made at the end of eachfinancial year to individuals may be at,above or below the target and this will
be determined according to ANZ Group,
Division and Individual Performance.
Performance objectives are set at thestart of each financial year according
to a balanced scorecard of measures at
the Group, Division and Individual level.
These measures are aligned with theachievement of ANZ’s business plan,
and are the most appropriate indicatorsof performance. Division and Individual
objectives are a subset of the Groupobjectives, which ensures there isalignment of objectives through theexecutive population.
Performance objectives under ANZ’sbalanced scorecard include a numberof qualitative and quantitative measures
which include, but are not limited to: Financial Measures including: Economic
Value Added (EVATM); Revenue and Net
Profit After Tax
 Customer Measures including: Customer
Satisfaction and Market Share

Employee Engagement, Risk
Management and Compliance MeasuresEnvironment, Health & Safety andCommunity Measures.
The STI is payable 100% in cash
(except where specific business plans
require otherwise). Executives are able
to elect to sacrifice part or all of their
incentive towards the purchase of ANZshares which are restricted from salefor 12 months, or towards additional
superannuation contributions.
The target STI award level for Specified
Executives is 100% of TEC in 2005
(increasing from 67% of TEC), with amaximum STI award of 150% of TEC.
For larger senior executive roles in thegeneral ANZ STI plan, the target STI is
67% of TEC, with a maximum of 100%of TEC, and for smaller senior executiveroles the target is 43% of TEC and the
maximum 65% of TEC. Note, the target
and maximum STI amounts for larger
and smaller senior executive roles mayvary for customised incentive schemes.

C4.2 Long-Term Incentives
Long-term incentives (LTIs) are used as amechanism to link a significant portion of
executives’ remuneration to the attainmentof sustained growth in shareholder value.
A comprehensive review of ANZ’s
Long-Term Incentive Program wasconducted in 2005 which resulted ina number of changes. The annual LTI
allocation to be made in November
2005 will now be delivered as 100%
Performance Rights. It was previously
delivered as Hurdled Options (50% ofgrant LTI value) and Deferred Shares (50%of grant LTI value). It was decided that theentire LTI allocation should be linked toa single long-term performance measure.
The size of individual LTI grants isdetermined by an individual’s levelof responsibility, performance and theassessed potential of the executive.
Typically at the most senior levels theTarget LTI value will range from around
10% to 24% of the individual’s target
reward mix, as shown in Figure 1 in
Section C2.
Executives are advised of their LTI dollar
value, which is then converted into a
number of Performance Rights basedon an audited valuation. ANZ engages
external experts (PricewaterhouseCoopers
and Mercer Finance & Risk Consulting) toindependently value the Performance
Right, taking into account factors including
the performance conditions, life of
instrument, share price at grant date etc.
These valuations are then audited by KPMG.
The Board then approves use of thehighest value. The LTI dollar value is thendivided by the approved value of the
Performance Right to determine thenumber of rights to be allocated.
EXAMPLE

Executive granted LTI value of $60,000

Approved Performance Right Valuation
is $10.85 per Performance Right$60,000 / $10.85 = 5,530 Performance
Rights allocated to executive

LTI allocations are made annually in or
around November.

Performance Rights(To be granted from October 2005)
A Performance Right is a right to acquirea share at nil cost, subject to satisfactorily
meeting time and performance hurdles.
Upon exercise, each Performance Right
entitles the holder to one ordinary share.
Performance Rights are ANZ’s preferred LTI
delivery vehicle as they provide a clearer,
more tangible value to the executive,
subject to satisfactorily performing relative
to the performance hurdle for vesting.
Performance Rights are designed to reward
executives for share price growth dependent
upon the Company’s Total Shareholder
Return (TSR) outperforming peers. TSR
represents the change in the value of ashare plus the value of reinvested dividends
paid. TSR was chosen as the mostappropriate comparative measure as it
focuses on the delivery of shareholder
value and is a well understood and tested
mechanism to measure performance.
The TSR vesting scale is designed
to ensure that executive rewards are
directly linked to the Company’s TSR and
are therefore aligned to the outcomes
experienced by other shareholders.
The proportion of Performance Rightsthat become exercisable will depend
upon the TSR achieved by ANZ relative tothe companies in the comparator group(shown below) over a three-year period.
There will not be any retesting feature.
Performance equal to the 50th percentileof the comparator group will result in half
the Performance Rights becoming
exercisable. Performance above the 50th
percentile will result in further Performance
Rights becoming exercisable, increasing
on a straight-line basis until all of the
Performance Rights become exercisable
where ANZ’s TSR is at or above the 75th
percentile when compared with thecomparator group. TSR is measured ona pro-rata basis; where ANZ’s performancefalls between two of the comparators, theactual relative level of TSR, rather thansimple ranking, will determine the levelof vesting.
An averaging calculation will be used
for TSR over a 90 day period for startand end values in order to reduce shareprice volatility.

It should also be noted that where medianperformance is achieved, executives’ total
remuneration will typically be below market
median for the financial services industry.
75th percentile performance is required
for full vesting which enables executives
to receive the full value of their LTI. To
ensure an independent TSR measurement,
ANZ engages the services of an externalorganisation (Macquarie Financial Services)
to calculate ANZ’s performance against
the TSR hurdle.

Comparator GroupThe peer group of companies against
which ANZ’s TSR performance is measured,comprises the following companies:

The conditions under which Performance
Rights are granted are approved by the
Board in accordance with the rules of the
ANZ Share Option Plan. Performance
conditions are explained in moredetail below.

QBE Insurance Group Limited

Each Performance Right has thefollowing features
 The performance hurdle is tested at
the end of three years;
No dividends will be payable on the
Performance Rights until they vest;



A two-year exercise period thatcommences three years after the grant
date subject to the performance hurdle
being cleared;

AMP Limited
AXA Asia Pacific Holdings Limited
Commonwealth Bank of Australia
Insurance Australia Group Limited
Macquarie Bank Limited
National Australia Bank Limited
St George Bank Limited
Suncorp-Metway Limited
Westpac Banking Corporation
This comparator group was chosenbecause it represents ANZ’s key competitors
in the financial services industry, are an
appropriate reference group for investors
and are of sufficient size by market
capitalisation and weight in ASX Top 50.
Refer to section F11 for details pertaining
to legacy LTI equity vehicles (which are
yet to vest).

Upon exercise, each Performance Right
entitles the holder to one ordinary share;In case of dismissal for misconduct,
Performance Rights are forfeited;In case of resignation or termination
on notice, only Performance Rights that
become exercisable by the end of thenotice period may be exercised;In case of retrenchment or retirement,
Performance Rights will be performancetested at the date of termination, andwhere performance hurdles have beenmet, Performance Rights will be pro-rated
and a grace period provided in which
to exercise;In case of death or total and permanent
disablement, a grace period is provided inwhich to exercise all Performance Rights.
The hurdles would be waived; and

Performance hurdle, which is
explained above.



remuneration report69C5. PERFORMANCE OF ANZ
Table 4 shows ANZ’s annual performance over the five-year period spanning 1 October 2000 to 30 September 2005. The table illustrates
the impact of ANZ’s performance on shareholder wealth, taking into account dividend payments, share price changes and returns on capitalduring the financial year.
TABLE 4

FY 2001

FY 2002

FY 2003

FY 2004

FY 2005

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

112.7
1,870
73
15.28
26.2

141.4
2,322
85
16.88
15.3

142.4
2,348
95
17.17
6.7

153.1
2,815
101
19.02
17.0

160.9
3,018
110
24.00
32.6

FIGURE 2240
220

Total cumulative return %(TSR rebased to October 2000)

200
180
160
140
120
100

Oct 05

Apr 05

Apr 04

Oct 03

Apr 03

Oct 02

Apr 02

Oct 01

Apr 01

Oct 04

Performance period end date80

in September 2005 and adherence to thisguideline will be regularly monitored.

D1. CEO REMUNERATION OVERVIEW

D2. CEO’S CONTRACT TERMS

The structure of J McFarlane’s remuneration,
which is in accordance with his
employment agreement, is as follows:

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

Fixed Remuneration: Consists ofsalary, benefits and superannuation
contributions. Since October 2003,
J McFarlane has elected to receive almost
all of his Fixed Remuneration in the formof shares purchased under the Directors’
Share Plan. These shares are not subject
to a performance condition as they areprovided in place of cash remuneration
at the CEO’s choice. However, they are
subject to forfeiture in case of termination
for serious misconduct.


ANZ TSR
S&P/ASX 200 Banks Accumulation Index
Median LTI Comparator Group TSR

ANZ 5-Year Cumulative Total Shareholder
Return Performance Comparison

Oct 00In table 4, ANZ’s Total Shareholder
Return (TSR, which includes share pricegrowth, dividends and other capitaladjustments) has been shown for eachindividual financial year between 2001
and 2005. Figure 2 however, compares
ANZ’s TSR performance against themedian TSR of the LTI comparatorgroup and the S&P/ASX 200 Banks
Accumulation Index over the 2000
to 2005 measurement period. The
difference between S&P/ASX 200
Banks Accumulation Index and the
median of ANZ’s comparator group overthe 2004 and 2005 financial years isdue to the weightings in the Index of
the large banking institutions that haveunderperformed comparatively during
this period; whereas the organisations
in ANZ’s comparator group areweighted evenly.

SECTION D. CHIEF EXECUTIVEOFFICER’S REMUNERATION Short-Term Incentive: The Board sets
J McFarlane’s balanced scorecard at the
beginning of the financial year. The Board
then assesses performance against theseobjectives at the end of the year. These
objectives are aligned with the achievementof ANZ’s business plan, and are the mostappropriate indicators of performance.
These objectives include a number ofquantitative and qualitative measures,
which include (but are not limited to)financial, customer, people, environmentand community measures. J McFarlane’s
STI may be paid in cash or in sharespurchased under the Directors’ SharePlan. J McFarlane has typically elected
to receive shares.

Long-Term Incentive: J McFarlane’sLong-Term Incentive is made up of Hurdled
Options and Performance Shares asapproved by shareholders at the 2001 and2004 Annual General Meetings respectively.
The performance conditions pertaining tothe options issued during the year are
indicated in F11.1 Hurdled A options.

In addition to mandatory
superannuation contributions, theCompany makes additional employer
contributions of $300,000 per annum(effective from 1 October 2003), paid
quarterly to J McFarlane’s chosen
superannuation fund; and

J McFarlane was granted 175,000
Performance Shares on 31 December 2004.


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



The remuneration of J McFarlane for theyear ended 30 September 2005 is set out
in Table 1 in section A of this Remuneration
Report. The mix of remuneration for
J McFarlane under his current contract
is made up as follows: Fixed Remuneration of $2,000,000
per annum; Target variable Short-Term Incentive of$2,000,000 per annum; Long-Term Incentive of $2,600,000 –one allocation only (based on valuationof 175,000 performance shares at issue).

Shareholding Guideline
The Chief Executive Officer of ANZ is
expected to accumulate ANZ shares, overa five year period, to the value of 200% of
his Fixed Remuneration and to maintainthis shareholding while CEO of ANZ. This
shareholding guideline was introduced70

 The term of the contract was extended
by one year to 30 September 2007;

D3. CEO’S RETIREMENT AND
TERMINATION BENEFITS
In accordance with J McFarlane’scontract variation (refer section D2),
J McFarlane’s nominated superannuation
fund receives $300,000 per annum(effective from 1 October 2003, paid
quarterly) in addition to mandatory
superannuation contributions.
J McFarlane can terminate his employment
agreement by providing 12 months’
notice. ANZ may terminate the employment
agreement by providing notice equal tothe unexpired term of the employment
agreement (which ends on 30 September2007). If ANZ terminates the employment
agreement without notice and thus
breaches its obligation to provide therequired notice, ANZ has agreed withJ McFarlane that the damages payable by
ANZ for breach of contract would be equal
to the Total Employment Cost (TEC) thatwould otherwise be received over theremainder of the contract (TEC comprises
salary or fees, non-monetary benefits andmandatory superannuation contributions).
In circumstances of serious misconduct,
J McFarlane is only entitled to payment
of TEC up to the date of termination.

Payment of accumulated superannuation
benefits plus statutory entitlements oflong service leave and annual leave(calculated on the basis of salary or fees)
applies in all events of separation.
In the event of resignation not approvedby the Board or dismissal for serious
misconduct, all unexercised options andPerformance Shares will be forfeited.
In the event of termination on notice or
agreed separation, all vested options andPerformance Shares must be exercised
within 6 months of the termination or
agreed separation date, subject tomeeting the relevant performance hurdles.
In the event of serious misconduct, shares
held in the Directors’ Share Plan will be
forfeited. On resignation or termination on
notice, shares held under the Directors’
Share Plan will be released.

D4. CEO’S PARTICIPATION IN
EQUITY PROGRAMS
Hurdled Options
At the 2001 Annual General Meeting, fourtranches of options were approved for
granting by the Board: 500,000 in 2001;
1,000,000 in 2002; 1,000,000 in 2003
and 500,000 in 2004. For options granted
to the CEO, the exercise price is equal to
the weighted average share price on the
ASX during the 5 trading days immediately
before or after the Company’s Annual
General Meeting that immediately
precedes the allocation. The exercise of
these options is subject to performance
hurdles being satisfied. J McFarlane’s
specific performance hurdles, for options
granted during the year, are indicated in
section F11.1 (Hurdled A), and for
Performance Shares in section F11.3. For
options granted to the CEO, the life andexercise period may differ, as disclosed in F3.
Performance Shares
175,000 Performance Shares were issued
to J McFarlane on 31 December 2004 as
part of his contract extension, as approvedby shareholders at the 2004 Annual
General Meeting. No dividends will bepayable on the shares until they vest.
Vesting will be subject to time andperformance hurdles being satisfied
as detailed in section F11.3. As these
Performance Shares were granted as partof J McFarlane’s contract extension, as
opposed to a new contract, the conditionsof grant were aligned with those of
the original contract apart from theapplication of a TSR performance hurdle.
Directors’ Share Plan
J McFarlane participates in the Directors’
Share Plan, which is explained in section B3.
Please refer to section F for details ofgrants and holdings.

remuneration report71

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

E1. OPEN-ENDED CONTRACTS (Dr RJ EDGAR, E FUNKE KUPPER, BC HARTZER, GK HODGES, PR MARRIOTT, S TARGETT)

E2. FIXED TERM CONTRACT (SIR J ANDERSON)

Length of Contract

Open-ended.

Length of Contract

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

Fixed Remuneration

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

Fixed Remuneration

The Total Employment Cost (TEC) package is NZD1,000,000 per annum and is inclusive of employer
contributions to the superannuation fund.

Short-Term Incentive

Eligible to participate. Target opportunity of 100% of Total Employment Cost (refer to section C4.1 fordetails of short-term incentive arrangements).

Short-Term Incentive

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

Long-Term Incentive

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

Equity Participation

Resignation

Employment may be terminated by giving 6 months’ written notice.

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

Resignation

Sir J Anderson may terminate his employment by giving 12 months’ written notice. On resignation any
ZPOs which have not been exercised as at the termination date will lapse.

Retirement

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

Termination on Noticeby ANZANZ National Bank Limited may terminate Sir J Anderson’s employment by providing notice or payment
in lieu of notice equal to the unexpired term of the employment agreement (which ends on 15 April2006). On termination on notice, any options may be exercised in accordance with the ANZ Share
Option Plan Rules.

Death or Total andPermanent Disablement

Exercise any ZPOs; pro-rata incentive.

Termination forserious misconduct

ANZ National Bank Limited may terminate Sir J Anderson’s employment at any time without notice forserious misconduct, and Sir J Anderson will only be entitled to payment up to the date of termination.
On termination for serious misconduct any ZPOs which have not been exercised as at the termination
date will lapse.

On resignation any options and unvested deferred shares will be forfeited.
Retirement

On retirement, shares and options are released in full.

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

Redundancy

If ANZ terminates employment for reasons of bona fide redundancy, a severance payment will bemade that is equal to 12 months TEC.
All STI deferred shares are released. All options granted since 24 April 2002 are released on a pro-ratabasis – all prior grants may be exercised. All LTI deferred shares granted since 23 October 2002 arereleased on a pro-rata basis – all prior grants will vest.
There is discretion to pay incentives on a pro-rata basis (depending on termination date and subject tobusiness performance).

Death or Total andPermanent Disablement

All options and shares released; pro-rata incentive.

Termination forserious misconduct

ANZ may immediately terminate the executive’s employment at any time without notice in the caseof serious misconduct, and the employee will only be entitled to payment of TEC up to the dateof termination.
On termination for serious misconduct any options and any deferred shares still held in trust will
be forfeited.

Other Aspects

72

S Targett: Subject to continued employment and the approval of the Board, four tranches to the valueof $700,000 each of deferred shares to be granted at six month intervals in May and November in2004 and 2005, and Hurdled Options with a value of $750,000 granted within 3 months ofcommencement of employment, to compensate for the loss of equity from S Targett’s previous
employer. On Termination on Notice, sign-on options can be exercised as a pro-rata proportion to theperiod of employment. Sign-on deferred shares will vest in full, including any scheduled to be granted
during the notice period.

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

remuneration report73

SECTION F. EQUITY INSTRUMENTS RELATING TO DIRECTORS AND SPECIFIED EXECUTIVES

F5. DEFERRED SHARES GRANTED TO SPECIFIED EXECUTIVES

F1. SHAREHOLDINGS OF NON-EXECUTIVE DIRECTORS (INCLUDING MOVEMENTS DURING THE YEAR)LTI Deferred Shares1

Name

Balance ofshares as
at 1 October
20041

Sharesacquired
during the year
in lieu of salary2

Shares resulting
from any otherchange during
the year3

Balance ofshares held
as at 30 Sept
20051,4Balance ofshares held as
at report sign-off
date1

CB Goode
GJ Clark
JC Dahlsen (retired 3 February 2005)
RS Deane
JK Ellis
DM Gonski
MA Jackson
DE Meiklejohn
JP Morschel
BW Scott (retired 23 April 2005)

502,464
2,000
121,91575,36484,476
52,612
93,2974,185
4,000
72,47520,781
–
–
–
1,703
2,055
–
–
1,502
–

12,392–(8,441)
–
5,017
237
–
2,141
–
(6,494)535,637
2,000
113,474
75,364
91,19654,90493,297
6,326
5,502
65,981

559,451
3,766
113,474
75,364
92,65857,217
93,297
6,326
7,268
65,981

1
2
3
4

Balance of shares held at 1 October 2004, 30 September 2005 and 2 November 2005, includes directly held shares, nominally held shares and shares held by personally related entities.
All shares acquired in lieu of salary were done so under the Directors’ Share Plan (refer to section B3 of this Remuneration Report for an overview of the Directors’ Share Plan).
Other shares resulting from any other changes during the year include the net result of any shares purchased, sold or acquired under the Dividend Reinvestment Plan.
The following shares were nominally held as at 30 September 2005: CB Goode – 141,860; RS Deane – 73,000; JK Ellis – 23,900; DM Gonski – 52,159; MA Jackson – 10,632;
DE Meiklejohn – 2,656; JP Morschel – 1,502.

Name

Dr RJ Edgar

F2. SHAREHOLDINGS OF CEO (INCLUDING MOVEMENTS DURING THE YEAR)
Balance ofshares as at
1 Oct 20041

Shares acquired
during the year
in lieu of salary2

Performance
shares granted
during the year3,4

Value of performance
shares granted
during the year5$

Shares acquired
during the year
through the exercise
of options6

Shares resulting
from any otherchange during
the year7

Balanceof shares
held as at
30 Sep 20051,8

Balance ofshares held as
at report sign-off
date1

1,690,507

89,995

175,000

2,628,500

500,000(635,787)

1,819,715

1,820,056

1 Balance of shares held at 1 October 2004, 30 September 2005 and 2 November 2005 includes directly held shares, nominally held shares and shares held by personally related entities.
2 All shares acquired in lieu of salary were done so under the Directors’ Share Plan (refer to section B3 of this Remuneration Report for an overview of the Directors’ Share Plan).
3 The grant of performance shares on 31 December 2004 was approved by shareholders at the 2004 AGM, with the earliest vesting date being 31 December 2006.
Refer to section F11.3 for further information.
4 Nil performance shares forfeited or vested. The maximum amortisation balance (ie 1 October 2005 to vesting date) is $1,645,513 for subsequent financial years, however the value will be nil
if the minimum performance hurdle is not achieved.
5 The fair value of performance shares granted during the year is based on the fair value of the shares as at 31 December 2004 ($15.02) multiplied by the number granted.
6 All options held/exercised by the CEO have been approved by shareholders (December 1999 and December 2001).
7 Other shares resulting from any other changes during the year includes the net result of any shares purchased, sold, or acquired under the Dividend Reinvestment Plan. It also includes thoseshares received on 28 October 2004 in regards to the 2004 incentive (for the period ending 30 September 2004).
8 1,270,176 shares were held nominally as at 30 September 2005.

F3. OPTIONS GRANTED TO CEO1
Type ofoptions

HurdledHurdled A
Hurdled A
Hurdled A
Hurdled A3
2

Grant date

First date
exercisable

Date ofexpiry4

Exercise price5$

Numbergranted6,7

Number vested
during the year

Percentage thatvested during
the year %31-Dec-01
31-Dec-01
31-Dec-02
31-Dec-03
31-Dec-04

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

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

16.48
16.80
16.69
17.48
20.49

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

500,000–
1,000,000
–
–

100
–
100
–
–

3,500,000

1,500,000

Total

Vested and
Vested andexercisable as at unexercisable as
30 Sep 2005
at 30 Sep 2005–
500,000
500,000––––
500,000––

1,000,000

500,000

1 All options held/exercised by the CEO have been approved by shareholders (December 1999 and December 2001).
2 The options may be exercised only if the “ANZ Accumulation Index” over the period from the date on which the options are granted to the last trading day of any month occurring during the relevant
exercise period equals or exceeds the “ASX 100 Accumulation Index” calculated over the same period. Refer to section F11.1 for Hurdled A details.
3 The fair value per option at the 31 December 2004 grant date is $1.98. Refer to section F9 for details of the valuation methodology and inputs.
4 Treatment of options on termination of employment is explained in section D3 of the Remuneration Report.
5 The exercise price is equal to the weighted average share price during the 5 trading days immediately after the Company’s Annual General Meeting. Note, the original exercise price of options
issued prior to the Renouncable Rights issue in November 2003 have been reduced by 72 cents, because of the dilution of share capital associated with the Renouncable Rights issue.
6 Nil options forfeited or expired during the period.
7 The maximum amortisation balance (ie 1 October 2005 to vesting date) is $885,321 for subsequent financial years, however the value will be nil if the minimum performance hurdles are not achieved.

F4. OPTION HOLDINGS OF CEO (INCLUDING MOVEMENTS DURING THE YEAR)1

Balance as
at 1 Oct 2004

Granted during
the year as
remuneration

Value ofoptions granted
during the year2$

3,000,000

500,000

990,000

Exercisedduringthe year

500,000

Date ofexerciseof options

Number ofordinary sharesissued on exercise
of options

Value ofoptions exercised
during the year3$

Share priceon date of
exercise ofof options$

08-Aug-05

500,000

2,530,000

21.54

Balance
as at
30 Sep 2005

Total value of
options granted
and exercised
during the year$

16.48 3,000,000

3,520,000

Amount paid
per share$

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

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

2,700
3,200
7,600
8,500
8,889
25,0008,452
6,519
26,000

n/a
n/a
n/a
n/a
n/a
n/a
n/a
134,941
538,189

2,700
3,200
–
–
–
–
–
–
–

100
100
–
–
–
–
–
–
–

96,860673,130

5,900

6

6,000
4,500
8,000
6,800
6,838
6,256
6,018

n/a
n/a
n/a
n/a
n/a
n/a
124,570

6,000
4,500
–
–
–
–
–

100
100
–
–
–
–
–

44,412

124,570

10,500

24

2,800
4,600
6,600
6,500
7,408
7,135
9,127

n/a
n/a
n/a
n/a
n/a
n/a
188,925

2,800
4,600
–
–
–
–
–

100
100
–
–
–
–
–

44,170188,925

7,400

17

1,000
1,400
3,800
6,500
5,699
6,586
7,522

n/a
n/a
n/a
n/a
n/a
n/a
155,702

1,000
1,400
–
–
–
–
–

100
100
–
–
–
–
–

32,507

155,702

2,400

7

5,700
5,500
9,300
9,100
9,573
9,275
8,475

n/a
n/a
n/a
n/a
n/a
n/a
175,429

5,700
5,500
–
–
–
–
–

100
100
–
–
–
–
–

56,923

175,429

11,20020

6,519

134,941––

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

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

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

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

Total
GK Hodges

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

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

Total
PR Marriott

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

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

Total
S Targett

Percentagethat vested
during the year%

Vesting date

Total
BC Hartzer

Number thatvested during
the year

Grant date

Total
E Funke Kupper

Value of deferredshares granted
during the year4$

Numbergranted2,305-Nov-04

05-Nov-07

1 Deferred shares issued as LTI shares were granted under the ANZ Long-Term Incentive Program and relate to those deferred shares granted or vested during the year, and those yet to vest.
The shares are restricted for 3 years and may be held in trust for up to ten years. Refer to section F11.2 of the Remuneration Report for more details.
2 Nil shares forfeited during the year.
3 The maximum amortisation balance (ie 1 October 2005 to vesting date) for each Specified Executive for subsequent financial years is as follows: Dr RJ Edgar $801,535; E Funke Kupper $220,014;
BC Hartzer $275,486; GK Hodges $235,101; PR Marriott $311,436; S Targett $94,397.
4 The value of deferred shares granted during the year is based on the volume weighted average price of the Company’s shares traded on the ASX on the day the shares were granted,
multiplied by the number granted.

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

74

remuneration report75F5. DEFERRED SHARES GRANTED TO SPECIFIED EXECUTIVES (continued)

F5. DEFERRED SHARES GRANTED TO SPECIFIED EXECUTIVES (continued)

STI Deferred Shares1

Other Deferred Shares1

Name

Dr RJ Edgar

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

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

3,891
4,302
6,423
5,622
6,781
7,683

3,891
4,302
–
–
–
–

100
100
–
–
–
–

34,702

8,193

24

6,510
5,724
8,554
4,148
7,636
7,052

6,510
5,724
–
–
–
–

100
100
–
–
–
–

39,624

12,234

31

7,058
6,364
4,457
1,992
7,322
7,244

7,058
6,364
–
–
–
–

100
100
–
–
–
–

34,437

13,422

39

3,128
3,324
4,761
4,503
5,129
5,653

3,128
3,324
–
–
–
–

100
100
–
–
–
–

26,498

6,452

24

5,963
5,475
8,527
5,403
7,978
9,604

5,963
5,475
–
–
–
–

100
100
–
–
–
–

42,95011,43827

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

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

Total
BC Hartzer

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

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

Total
GK Hodges

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

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

Total
PR Marriott

Total

Percentagethat vested
during the year%

Grant date

Total
E Funke Kupper

Number thatvested during
the year

Numbergranted2,3

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

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

Name

S TargettValue of deferredshares granted
during the year4$

Number thatvested during
the year

Percentagethat vested
during the year%

Grant date

Vesting date

Numbergranted2,311-May-04
05-Nov-04
13-May-05

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

38,41935,10532,080n/a
726,659
707,339

–
–
–

–
–
–

105,604

1,433,998

–

–

Total

1 Other deferred shares issued to S Targett relate to the issue of deferred shares (four tranches to the value of $700,000 each to be issued at 6 month intervals in May and November in 2004 and 2005,
subject to Board approval and continuing employment) to compensate S Targett for the loss of access to equity as a result of his resignation from his previous employer.
2 Nil shares forfeited during the year.
3 The maximum amortisation balance (ie 1 October 2005 to vesting date) is $1,498,908 for subsequent financial years.
4 The value of deferred shares granted during the year is based on the volume weighted average price of the Company’s shares traded on the ASX on the day the shares were granted, multiplied by the
number granted.

F6. SHAREHOLDINGS OF SPECIFIED EXECUTIVES (INCLUDING MOVEMENTS DURING THE YEAR)

Name

Sir J Anderson
Dr RJ Edgar
E Funke Kupper4
BC Hartzer
GK Hodges
PR Marriott
S TargettBalanceof shares as at
1 Oct 20041

Sharesgrantedduring the year
as remuneration

Number of sharesacquired during theyear throughexercise of options

Shares resulting
from any otherchange during
the year2

Balanceof shares
held as at
30 Sep 20051,3

12,022384,214185,008
79,046
139,397
677,867
38,419–32,519
6,018
9,127
7,522
8,475
73,704

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

34,392421,733
189,892
88,638146,919
641,633
113,123

1 Balance of shares held at 1 October 2004 and 30 September 2005, include directly held shares, nominally held shares and shares held by personally related entities.
2 Other shares resulting from any other changes during the year include the net result of any shares purchased, sold or acquired under the Dividend Reinvestment Plan.
3 The following shares were held nominally as at 30 September 2005: Sir J Anderson – 55; Dr RJ Edgar – 213,510; E Funke Kupper – 189,242; BC Hartzer –78,607; GK Hodges – 104,012;
PR Marriott – 177,930; S Targett – 112,123.
4 Amounts shown do not include ANZ Stapled Exchangeable Preferred Securities (ANZ StEPS). E Funke Kupper held 500 ANZ StEPS as at 1 October 2004; this holding remained unchanged
up to and including 30 September 2005. No other Specified Executives held ANZ StEPS.

1 Deferred shares issued as STI shares were granted under a historical ANZ Short-Term Incentive Program and relate to those deferred shares vested during the year and those yet to vest.
(STI is now delivered generally as 100% cash, therefore no STI deferred shares were granted to the Specified Executives during the year. Refer to section C4.1). The shares are restricted for 3 years
and may be held in trust for up to ten years.
2 Nil shares forfeited during the year.
3 The maximum amortisation balance (ie 1 October 2005 to vesting date) for each Specified Executive for subsequent financial years is as follows: Dr RJ Edgar $141,285; E Funke Kupper $135,693;
BC Hartzer $125,786; GK Hodges $106,248; PR Marriott $167,451.

76

remuneration report77F7. OPTIONS GRANTED TO SPECIFIED EXECUTIVES1

Name

Type of options2

Grant
date

Sir J Anderson

Zero-Priced
Zero-Priced

05-Nov-04
13-May-05

First date
exercisable

Date ofexpiry3

Exercise
price4$

Numbergranted5,6

Value per option
at grant datefor options
granted during
the year705-Nov-04
13-May-05

04-Nov-06
12-May-07––

11,69910,671

20.70
22.05

Total
Dr RJ Edgar

22,370
Hurdled A
Hurdled A
Index-Linked
Index-Linked
Hurdled A
Hurdled A
Hurdled B

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

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

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

16.33
18.03
17.34
17.60
17.55
18.22
20.68

Total
E Funke Kupper

n/a
n/a
n/a
n/a
n/a
n/a
2.50

528,781
Hurdled A
Hurdled A
Index-Linked
Index-Linked
Hurdled A
Hurdled A
Hurdled B

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

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

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

16.33
18.03
17.34
17.60
17.55
18.22
20.68

Hurdled A
Hurdled A
Hurdled A
Hurdled A
Index-Linked
Index-Linked
Hurdled A
Hurdled A
Hurdled B

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

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

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

12.98
16.33
18.03
18.03
17.34
17.60
17.55
18.22
20.68

Total
BC Hartzer

34,00041,000125,000
147,000
66,666
63,11552,00077,00057,000131,000
119,000
51,282
46,72248,000

n/a
n/a
n/a
n/a
n/a
n/a
2.50

530,004

Total

42,00036,00059,00050,000109,000
113,000
55,55553,27972,800

n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
2.50

590,634

Numbervested during
the year

Percentagethat vested
during the year%

Vested andexercisable
as at
30 Sep 2005

11,69910,671

100
100

–
–

22,370100–

34,00041,000
–
–
–
–
–

100
100
–
–
–
–
–

–
–
–
–
–
–
–

75,00014–

77,00057,000
–
–
–
–
–

100
100
–
–
–
–
–

–
–
–
–
–
–
–

134,000

25––
36,00059,00050,000
–
–
–
–
–

–
100
100
100
–
–
–
–
–

42,00036,00059,00050,000–––––145,000

25

187,000

1 Options granted to Specified Executives pertains to those options granted, vested or exercised during the year, options yet to vest and any unexercised options.
2 Refer to section F11.1 for more details pertaining to hurdled A, hurdled B and index-linked options. Refer to section E2 for further information on zero priced options granted
to Sir J Anderson.

Name

Type of options2

Grant
date

GK Hodges

Hurdled A
Hurdled A
Hurdled A
Hurdled A
Hurdled A
Index-Linked
Index-Linked
Hurdled A
Hurdled A
Hurdled B

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

First date
exercisable

Date ofexpiry3

Exercise
price4$

Numbergranted5,6

Value per option
at grant datefor options
granted during
the year722-Nov-03
25-Apr-04
25-Oct-04
24-Apr-05
24-Apr-05
23-Oct-05
20-May-06
05-Nov-06
11-May-07
05-Nov-07

21-Nov-07
24-Apr-08
24-Oct-08
24-Apr-09
24-Apr-09
22-Oct-09
19-May-10
04-Nov-10
10-May-11
04-Nov-11

13.62
12.98
16.33
18.03
18.03
17.34
17.60
17.55
18.22
20.68

26,00016,00013,00017,40050,00063,000113,000
42,73549,18160,000

n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
2.50

Total

450,316PR Marriott

Hurdled A
Hurdled A
Hurdled A
Hurdled A
Hurdled A
Index-Linked
Index-Linked
Hurdled A
Hurdled A
Hurdled B

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

23-Feb-03
22-Nov-03
25-Apr-04
25-Oct-04
24-Apr-05
23-Oct-05
20-May-06
05-Nov-06
11-May-07
05-Nov-07

22-Feb-07
21-Nov-07
24-Apr-08
24-Oct-08
24-Apr-09
22-Oct-09
19-May-10
04-Nov-10
10-May-11
04-Nov-11

9.39
13.62
12.98
16.33
18.03
17.34
17.60
17.55
18.22
20.68

25,000170,000
80,00073,00070,000153,000
158,000
71,794
69,26367,600

Hurdled A
Hurdled B

11-May-04
05-Nov-04

11-May-07
05-Nov-07

10-May-11
04-Nov-11

18.22
20.68

307,3778
52,000

Total

n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
2.50

937,657

S Targett
Total

n/a
2.50

359,377

Numbervested during
the year

Percentagethat vested
during the year%

Vested andexercisable
as at
30 Sep 2005––
13,00017,40050,000
–
–
–
–
–

–
–
100
100
100
–
–
–
–
–

–
–
–
17,40050,000–––––80,40018

67,400–––73,00070,000
–
–
–
–
–

–
–
–
100
100
–
–
–
–
–

25,000170,000–
73,00070,000–––––143,000

15

338,000

–
–

–
–

–
–

–

–

–

3 Treatment of options on termination of employment is explained in section E of the Remuneration Report.
4 The exercise price is equal to the weighted average share price over the 5 trading days up to and including the grant date. Note, the original exercise price of options issued prior to the Renouncable
Rights issue in November 2003 have been reduced by 72 cents, because of the dilution of share capital associated with the Renouncable Rights issue. Given index-linked options have a dynamic
exercise price, the original exercise price is shown in F7 (refer to F11.1 for more details).
5 No additional options were granted in the period up to and including 2 November 2005, and nil options forfeited or expired.
6 The maximum amortisation balance (ie 1 October 2005 to vesting date) for each Specified Executive for subsequent financial years is as follows: Dr RJ Edgar $266,582; E Funke Kupper $218,793;
BC Hartzer $272,560; GK Hodges $232,767; PR Marriott $309,425; S Targett $493,628. The value will be nil however, if the minimum performance hurdles are not achieved.
7 Refer to section F9 for details of the valuation methodology and inputs.
8 S Targett was granted Hurdled Options to compensate for the loss of equity from S Targett’s previous employer.

F8. OPTION HOLDINGS OF SPECIFIED EXECUTIVES (INCLUDING MOVEMENTS DURING THE YEAR)
Resultingfrom anyother change
during year

Value ofoptions granted
during the year1$

Exercisedduring the year

Date ofexerciseof options

Number ofordinary sharesissued on exercise
of options

Value ofoptions exercised
during the year2$

Share price ondate of exercise
of options$

Amount paid
per share$

Balance
as at
30 Sep 2004

Total value of
options granted
and exercised
during the year3 $Name

Type of options

Balance as
at 1 Oct 2004

Granted during
the year as
remuneration

Sir J Anderson

Zero-priced1–

22,370–477,452–

11,69910,67110-Nov-04
17-May-05

11,69910,671

233,515
229,533

19.96
21.51

–
–

–

940,500

Dr RJ Edgar

Hurdled

204,781

52,000–130,000–––

34,00041,000–187,982
156,984
–

21.86
21.86
–

16.33
18.03
–

474,966

272,000

20-May-05
20-May-05–

181,781Index-Linked

34,00041,000–272,000–

Hurdled

232,004

48,000–120,000–––

77,00057,000–264,403214,666
–

19.76
21.80
–

16.33
18.03
–

599,069

250,000

27-Oct-04
06-May-05–

146,004

Index-Linked

77,00057,000–250,000–

BC Hartzer

HurdledIndex-Linked

295,834
222,000

72,800–––

182,000
–

–
–

–
–

–
–

–
–

–
–

–
–

368,634
222,000

182,000–

GK Hodges

Hurdled214,316

60,000–150,000–––

26,00016,00013,000–214,211142,062
71,875
–

21.86
21.86
21.86
–

13.62
12.98
16.33
–

578,148

176,000

20-May-05
20-May-05
20-May-05–

219,316

Index-Linked

26,00016,00013,000–176,000–

PR Marriott

HurdledIndex-Linked
Other4

559,057
311,000
11,00067,600
–
–

–
–
442

169,000––

80,000––11-May-05––

80,000––693,116
–

21.64
–
–

12.98
–
–

546,657
311,000
11,442

862,116––

S Targett

Hurdled307,377

52,000–130,000

–

–

–

–

–

–

359,377

130,000

E Funke Kupper

1 The value of options granted during the year is based on the fair value of the option multiplied by the number granted. Refer to section F9 for details of the valuation methodology and inputs.

3 Nil options lapsed during the year.

2 The value per option used in this calculation is based on the difference between the volume weighted average price of the Company’s shares traded on the ASX on the day the options were exercised,
and the exercise price. This is then multiplied by the number granted.

4 Other refers to share options granted to a personally related entity. 11,000 of these options were vested and exercisable as at 30 September 2005.

78

remuneration report79F9. OPTION VALUATIONS
Option type

HurdledHurdled (CEO)Zero-priced
Zero-priced

Grant date

Option value1$

Exercise price(5 day VWAP)$

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

2.50
1.98
20.70
22.05

20.68
20.49
–
–

Share priceat grant$

ANZ expectedvolatility2
%

20.70
20.56
n/a
n/a

18.50
16.50
n/a
n/a

Option term
(years)Vesting
period(years)Expected
life(years)Expected
dividend
yield3 %Risk freeinterest
rate4 %

7
4
2
2

3
2
–
–

3
2
n/a
n/a

5.30
5.50
n/a
n/a

5.24
5.10
n/a
n/a

1 The Binomial Option Pricing Model (“the model”) is used to assess the value of ANZ’s options (other than zero priced options, for which the value is the volume weighted average price of theCompany’s shares traded on the ASX on the day the options were granted). The model utilises probability theory to determine the value of an ANZ option based on likely share prices at the expiry
date of the option. In accordance with AASB 1046 and 1046A, the model reflects both the performance hurdles that currently apply to the Hurdled Options and the non-transferability of the options.
Under the terms of the Options, the hurdle conditions (outlined in section F11.1) must be met before the options may be exercised during the exercise period.
2 Expected volatility represents a measure of the amount by which ANZ’s share price is expected to fluctuate over the life of the options. The measure of volatility used in the model is the annualised
standard deviation of the continuously compounded rates of return on the historical share price over a defined period of time preceding the date of grant. This historical average annualised volatility isthen used to estimate a reasonable expected volatility over the expected life of the options.
3 In estimating the fair value of the ANZ option grant, expected dividends were included in the application of the model. The expected dividend yield applied to the model was based on an analysis of
ANZ’s historical dividend payments and yields.
4 The risk-free interest rate is based on the implied yield currently available on zero-coupon bonds issued by the Australian government, with a remaining term equal to the expected life of ANZ’s options.

F10. PERFORMANCE SHARE VALUATION
Share typeCEO Performance Shares

1

Grant date

Share value$

Share priceat grant$

ANZ expectedvolatility2%

Term ofshares(years)Vesting
period(years)Expected
life(years)Expected
dividend
yield3 %Risk freeinterest
rate4 %

31-Dec-04

15.02

20.56

16.50

5

2

2

5.40

5.00

1 The Binomial Pricing Model (“the model”) is used to assess the value of the Performance Shares. In accordance with AASB 1046 and 1046A, the model utilises probability theory to determine thevalue of the performance shares which also reflects the performance hurdle. Under the terms of the performance shares, the hurdle conditions (outlined in section F11.1) must be met before theshares can vest.
2 Expected volatility represents a measure of the amount by which ANZ’s share price is expected to fluctuate over the life of the options. The measure of volatility used in the model is the annualised
standard deviation of the continuously compounded rates of return on the historical share price over a defined period of time preceding the date of grant. This historical average annualised volatility
is then used to estimate a reasonable expected volatility over the expected life of the performance shares.
3 In estimating the fair value of the performance shares, expected dividends were included in the application of the model. The expected dividend yield applied to the model was based on an analysis
of ANZ’s historical dividend payments and yields.
4 The risk-free interest rate is based on the implied yield currently available on zero-coupon bonds issued by the Australian government, with a remaining term equal to the expected life of theperformance shares.

F11. LEGACY LONG-TERM INCENTIVE(LTI) PROGRAMS
F11.1 Options (Granted prior to
October 2005)
Each option has the following features:
An exercise price (or for index-linked
options, the original exercise price) thatis set equal to the weighted average saleprice of all fully paid ordinary shares in
the Company sold on the Australian Stock
Exchange during the 1 week prior to andincluding the date of grant;

A maximum life of 7 years and an exercise
period that commences 3 years after
the date of grant, subject to performance
hurdles being cleared. Options are
re-tested monthly (if required) after thecommencement of the exercise period; Upon exercise, each option entitles theoption-holder to one ordinary share; In case of resignation or termination on
notice or dismissal for misconduct: options
are forfeited;80 In case of redundancy: options are
pro-rated and a grace period is provided
in which to exercise the remaining options(with hurdles waived, if applicable);

In case of retirement, death or total andpermanent disablement: A grace period
is provided in which to exercise all options(with hurdles waived, if applicable); and

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


Hurdled Options (Hurdled B)(Granted November 2004)
In November 2004 hurdled options were
granted with a relative TSR performance
hurdle attached.
The proportion of options that become
exercisable will depend upon the TSR
achieved by ANZ relative to the companies
in the comparator group shown below.
Performance equal to the median TSR of
the comparator group will result in half theoptions becoming exercisable. Performance
above median will result in further options
becoming exercisable, increasing on astraight-line basis until all of the options
become exercisable where ANZ’s TSR is
at or above the 75th percentile in thecomparator group.

Comparator GroupAMP Limited
AXA Asia Pacific Holdings Limited
Commonwealth Bank of Australia
Insurance Australia Group Limited
Macquarie Bank Limited
National Australia Bank Limited
QBE Insurance Group Limited
St George Bank Limited
Suncorp-Metway Limited
Westpac Banking Corporation
Hurdled Options (Hurdled A)(Granted to Executives fromFebruary 2000 until July 2002, andfrom November 2003 until May 2004.
Granted to CEO from December 2001
until December 2004.)
Until May 2004, hurdled options were
granted to executives with the following
performance hurdles attached. The
following performance hurdles also
pertain to the options granted to the
CEO during the year:

1. Half the options may only be exercised
once ANZ’s TSR exceeds the percentagechange in the S&P/ASX 200 Banks(Industry Group) Accumulation Index,
measured over the same period (sinceissue) and calculated as at the last trading
day of any month (once the exercise
period has commenced); and2. The other half of hurdled options
may only be exercised once the ANZ TSR
exceeds the percentage change in the
S&P/ASX 100 Accumulation Index,
measured over the same period (sinceissue) and calculated as at the last
trading day of any month (once theexercise period has commenced).
Index-linked options (Granted from
October 2002 to May 2003)
Index-linked options have a dynamic
exercise price that acts as a built-in
performance hurdle, i.e. the exercise priceis adjusted in line with the movement in
the S&P/ASX 200 Banks (Industry Group)
Accumulation Index (excluding ANZ).
As an additional constraint, the adjusted
exercise price can only be set at or above
the original exercise price. They are
exercisable between the 3rd and 7thyear after grant date, subject to theadjusted exercise price being above
the prevailing share price.
F11.2 Deferred Shares(Granted from February 2000)
Deferred Shares granted under the LTI
arrangements were designed to reward
executives for superior growth whilst also
encouraging executive retention and anincrease in the Company’s share price.
Shares are subject to a time-based
vesting hurdle of 3 years, during whichtime they are held in trust;In case of redundancy: the number of
LTI shares that are released is pro-rated
according to the time held as a proportionof the vesting period; and

In case of retirement, death or total& permanent disablement: LTI shares are
released to executives.


Deferred Shares no longer form partof ANZ’s Senior Executive LTI program,
however there may be circumstances(such as retention) where this type ofequity (including Deferred Share Rights)
will be issued.
F11.3 Performance Shares(Granted December 2004 to CEO)In December 2004 Performance Shareswere granted to the CEO of ANZ with arelative TSR performance hurdle attached.
The proportion of shares that vest will
depend upon the TSR achieved by ANZ
relative to the companies in the comparatorgroup shown below. Performance equal tothe median TSR of the comparator groupwill result in half the Performance Shares
becoming exercisable. Performance above
median will result in further Performance
Shares becoming exercisable, increasing
on a straight-line basis until all of the
Performance Shares become exercisable
where ANZ’s TSR is at or above the 75th
percentile in the comparator group. No
dividends will be payable on the shares
until they vest, with the earliest possible
vesting date being 31 December 2006.

EXECUTIVE OFFICERS’SHARE OPTIONS
Details of share options issued over
un-issued shares granted to the Chief
Executive Officer, senior executives
and officers, and on issue as at thedate of this report are detailed in the
Remuneration Report and the 2005
Financial Report.
No person entitled to exercise any
option has or had, by virtue of an option,
a right to participate in any share issueof any other body corporate. The namesof all persons who currently hold options
are entered in the register kept by theCompany pursuant to section 170 of the
Corporations Act 2001. This register may
be inspected free of charge.

Signed in accordance with a resolutionof the directors.

Comparator GroupAMP Limited
AXA Asia Pacific Holdings Limited

Charles Goode
Director

Commonwealth Bank of Australia
Insurance Australia Group Limited
Macquarie Bank Limited

During the deferral period, the employee
is entitled to any dividends paid on
the shares;

National Australia Bank Limited

Shares issued under this plan may beheld in trust for up to 10 years;

Suncorp-Metway Limited

John McFarlane
Chief Executive Officer

Westpac Banking Corporation

2 November 2005





QBE Insurance Group Limited
St George Bank Limited

The value used to determine thenumber of LTI deferred shares to beallocated has been based on the volume
weighted average price of the shares
traded on the ASX in the week leading
up to and including the date of issue; In case of resignation or termination
on notice or dismissal for misconduct:
LTI shares are forfeited;

remuneration report81FINANCIAL STATEMENTS
AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED AND CONTROLLED ENTITIESCONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 SEPTEMBER 2005
Note

Consolidated
2005
2004
$m
$m

Assets

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED AND CONTROLLED ENTITIESCONSOLIDATED STATEMENT OF FINANCIAL PERFORMANCEFOR THE YEAR ENDED 30 SEPTEMBER 2005
Consolidated

Liquid assets
Due from other financial institutions
Trading securities
Investment securities
Net loans and advances
Customer’s liabilities for acceptances
Regulatory deposits
Shares in associates and joint venture entities
Deferred tax assets
Goodwill1
Other assets
Premises and equipment

11,600
6,348
6,285
6,941
230,952
13,449
159
1,872
1,337
2,898
9,903
1,441

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

293,185259,345

2005
$m

2004
$m

2003
$m

Total income

20,97917,50813,023

Interest income
Interest expense

17,427(11,629)

14,117(8,863)

10,215(5,904)

Total assets

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

5,798
144
(130)

5,254
–
–

4,311
–
–

Profit on disposal of investments
Other operating income
Share of joint venture profit from INGA
Share of associates’ profit (net of writeoffs)

14
3,381
107
50

–
3,246
97
48

–
2,702
55
51

Due to other financial institutions
Deposits and other borrowings
Liability for acceptances
Income tax liabilities
Payables and other liabilities
Provisions
Bonds and notes
Loan capital

12,027
185,693
13,4491,797
11,607914
39,073
9,137

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

Operating income
Operating expenses

9,350(4,515)

8,645(4,026)

7,119(3,228)

Total liabilities

273,697

241,420

Profit before debt provision and income tax
Provision for doubtful debts

4,835
(580)

4,619
(632)

3,891
(614)

Net assets

19,48817,925

Profit before income tax

4,255

3,987

3,277

Shareholders’ equity

Income tax expense(1,234)(1,168)(926)

Ordinary share capitalPreference share capital
Reserves
Retained profits

8,074
1,858
136
9,393

8,005
987
579
8,336

Liabilities

3

Profit after income tax
Net profit attributable to outside equity interests

3,021
(3)

2,819
(4)

2,351
(3)

Net profit attributable to shareholders of the Company

3,018

2,815

2,348

Currency translation adjustments, net of hedges after tax

(443)

233

(356)

Share capital and reserves attributable to shareholders of the Company
Outside equity interests

19,461
27

17,90718

Total adjustments attributable to shareholders of the Company recognised directly in equity

(443)

233

(356)

Total shareholders’ equity

19,48817,925

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

2,575

3,048

1,992

Contingent liabilities and contingent asset

6

The Notes appearing on pages 85 to 89 and the discussion and analysis appearing on pages 10 to 15 form an integral part of these financial statements.
1 Excludes notional goodwill of $711 million (September 2004: $754 million) included in the net carrying value of ING Australia Limited

Earnings per ordinary share (cents)
Basic
Diluted

160.9
157.5

153.1
149.7

142.4
141.7

Dividend per ordinary share (cents)

110

101

95

Net tangible assets per ordinary share ($)

8.05

7.51

7.49

The Notes appearing on pages 85 to 89 and the discussion and analysis appearing on pages 10 to 15 form an integral part of these financial statements

82

financial statements

83

NOTES TO THE CONCISE
FINANCIAL STATEMENTS

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED AND CONTROLLED ENTITIESCONSOLIDATED STATEMENT OF CASH FLOWSFOR THE YEAR ENDED 30 SEPTEMBER 2005
2005$mConsolidated
2004
$m

2003
$m

Inflows (Outflows)

Cash flows from operating activities
Interest received
Dividends received
Fees and other income received
Interest paid
Personnel expenses paid
Premises expenses paid
Other operating expenses paid
Income taxes paid
Goods and services tax (paid) received
Net (increase) decrease in trading securities

17,868144
3,316(11,414)(2,498)(367)(2,144)(1,072)18(821)

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

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

Net cash provided by operating activities

3,030

5,250

4,619

Cash flows from investing activities
Net decrease (increase)
Liquid assets – greater than three months
Due from other financial institutions
Regulatory deposits
Loans and advances
Shares in associates and joint venture entities
Investment securities
Purchases
Proceeds from sale or maturity
Controlled entities, associates and joint venture entities
Purchased (net of cash acquired)Proceeds from sale (net of cash disposed)
Premises and equipment
Purchases
Proceeds from sale
Other
Net cash (used in) investing activities

This Concise Financial Report has been
derived from the Group’s 2005 Financial
Report which complies with the Corporations
Act 2001, Accounting Standards, Urgent
Issues Group Consensus Views and otherauthoritative pronouncements of theAustralian Accounting Standards Board.
A full description of the accounting
policies adopted by the Group is provided
in the 2005 Financial Report. The
accounting policies are consistent withthose of the previous financial year.

2: CRITICAL ACCOUNTING POLICIES
(728)
(371)
5
(28,788)
157

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

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

The Group has identified the following
critical accounting policies:

Economic loss provisioning;Specific provisioning;

Deferred acquisition costs, software
assets and deferred income;(17,188)
17,856(14,411)
11,701(8,211)
6,785

(149)
144

(3,224)
–

–
–

(325)
86
(1,720)

(300)
53
1,735

(368)
51
1,401

(31,021)(27,117)(19,167)

 Valuation of goodwill in ANZ National
Bank Limited.

Details of the critical accounting
policies are contained within the ANZ
Results Announcement released on
25 October 2005 and in the 2005
Financial Report which can be obtained
from www.anz.com.

Cash flows from financing activities
Net (decrease) increase
Due to other financial institutions
Deposits and other borrowings
Payables and other liabilities
Bonds and notes
Issue proceeds
Redemptions
Loan capital
Issue proceeds
Redemptions
Decrease (increase) in outside equity interests
Dividends paid
Share capital issues (ordinary capital)
Share capital buy-backPreference share issue
Preference share issue costs
Preference share buy-back

1: BASIS OF PREPARATION OF
CONCISE FINANCIAL REPORT

4,972
19,856(1,339)(272)
11,216(1,061)(2,946)13,9951,000

17,968(5,025)

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

1,225
(93)
8
(1,808)
120
(204)
875
(4)
–

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

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

Net cash provided by financing activities

36,551

23,37818,936

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

3,030(31,021)36,551

5,250(27,117)
23,378

4,619(19,167)
18,936

Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Foreign currency translation on opening balances

8,560
7,854
(2,712)

1,511
7,315
(972)

4,388
7,925
(4,998)Cash and cash equivalents at end of year

13,702

7,854

7,315

Derivatives and hedging;Special purpose and off-balance
sheet vehicles; Valuation of investment in ING Australia
Limited; and3: MAJOR EVENTS THISFINANCIAL YEAR
 Euro Trust Securities: In December 2004
the Group raised $871 million through theissuance of a €500 million Floating Rate,
Non-cumulative Trust Securities (EuroTrust Securities) into the European market.
The instrument is similar in structure to
the Group’s existing Australian (ANZStEPS) and US Trust Securities.

Buy-Back of Ordinary Equity: The Group
commenced an on-market buy-back of$350 million of ordinary equity on
10 January 2005. Up until 15 September
2005, when ANZ went into a voluntary
black-out period for buying back shares,
the Group had repurchased 9.6 million
shares at an average cost of $21.15 pershare. The buy-back period has been
extended to 30 March 2006.

The National Bank of New Zealand –Integration: Integration has progressed
well in 2005 with the expectedorganisational and financial outcomesdelivered. The overall integration
objectives remain unchanged andinclude satisfying the Reserve Bank of
New Zealand Conditions of Registration.



4: AUSTRALIAN EQUIVALENTS
TO INTERNATIONAL FINANCIALREPORTING STANDARDSFor reporting periods commencing
1 October 2005, the Group is required
to prepare financial statements using
Australian Equivalents to International
Financial Reporting Standards (AIFRS).
The move to reporting under AIFRS
represents a major change to reporting
processes and will result in significant
changes to accounting policies.
On 1 October 2005, the Group commenced
application of AIFRS, covering all financial
systems and records. The key policy andfinancial impacts of transition to AIFRS
for the Group are contained within the
Chief Financial Officer’s review on page14, the ANZ Results Announcement
released on 25 October 2005 and in the2005 Financial Report. The results
announcement and 2005 Financial Report
can be obtained from www.anz.com.

ING New Zealand joint venture: In
September 2005 ANZ National Bank
Limited entered into a joint venture withING Insurance International Limited (INGII).
The joint venture, ING (NZ) Holdings Ltd,is 49% owned by ANZ National Bank Ltd
and 51% owned by INGII.

Reduction in Risk: The Company has
been actively reducing its risk profile overrecent years. This reduction is now largely
complete, following the sale of the London
Headquartered project finance activities
to Standard Chartered Bank and the exitfrom certain non-core structured
finance transactions.



The Notes appearing on pages 85 to 89 and the discussion and analysis appearing on pages 10 to 15 form an integral part of these financial statements

84

financial statements85

5: DIVIDENDS

6: CONTINGENT LIABILITIES AND
CONTINGENT ASSET

Ordinary Dividends
2005
$m

2004
$m

2003
$m

Interim dividend
Final dividend
Bonus option plan adjustment

930
983
(36)

850
7771
(29)

666
–
(25)

Dividends on ordinary shares1

1,877

1,598

641

1 Change in accounting standard in 2003. Dividends no longer accrued and are recorded when declared. Full year dividend of $1,077 million not included in above table

A fully franked final dividend of 59 cents, is proposed to be paid on each fully paid ordinary share on 16 December 2005 (2004: final
dividend of 54 cents, paid on 17 December 2004, fully franked; 2003: final dividend of 51 cents, paid 19 December 2003, fully franked).
The 2005 interim dividend of 51 cents, paid 1 July 2005, was fully franked (2004: interim dividend of 47 cents paid on 1 July 2004, fully
franked; 2003: interim dividend of 44 cents, paid 1 July 2003, fully franked).
The tax rate applicable to the franking credits attached to the interim dividend and to be attached to the proposed final dividend is 30%(2004: 30%; 2003: 30%).
Preference Dividends
2005
$m

2004
$m

2003
$m

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

–
66
18

36
62
–

102
–
–

Dividends on preference shares

84

98

102

Trust Securities Issues (ANZ TrUEPrS)In 1998 ANZ TrUEPrS issued 124,032,000 preference shares, raising USD 775 million via Trust Securities issues. The Trust Securities carried
an entitlement to a distribution of 8% (on USD 400 million) and 8.08% (on USD 375 million). The amounts were payable quarterly in arrears.
Payment dates were the fifteenth days of January, April, July and October in each year. The preference shares were bought back on
12 December 2003.
ANZ Stapled Exchangeable Preferred Securities (ANZ StEPS)
On 23 September 2003, the Group issued 10 million ANZ Stapled Exchangeable Preferred Securities (ANZ StEPS) at $100 each, raising$1 billion ($987 million net of issue costs of $13 million). ANZ StEPS comprise 2 fully paid securities – an interest paying unsecured note issued
by a New Zealand subsidiary (ANZ Holdings (New Zealand) Limited) which is stapled to a fully paid preference share issued by the Company.
Distributions on ANZ StEPS are non-cumulative and are payable quarterly in arrears (on 15 March, 15 June, 15 September and 15 Decemberof each year) based upon a floating distribution rate equal to the 90 day bank bill rate plus a 100 basis point margin. At each payment datethe 90 day bank bill rate is reset for the next quarter. Dividends are not payable on the preference share while it is stapled to the note. If
distributions are not paid on ANZ StEPS, the Company may not pay dividends or return capital on its ordinary shares or any other sharecapital or security ranking equal or below the preference share component.
Euro Trust Securities
On 13 December 2004, the Group issued 500,000 Euro Trust Securities at €1,000 each into the European market, raising €500 billion(A$871 million at the spot rate at the date of issue, net of issue costs). The Euro Trust Securities are similar in structure to the Group’s
existing Australian (ANZ StEPS) and US Trust Securities, in that they comprise 2 fully paid securities – an interest paying unsecured noteissued by a United Kingdom subsidiary (ANZ Jackson Funding PLC) and a fully paid €1,000 preference share issued by the Company, which
are stapled together and issued as a Euro Trust Security through ANZ Capital Trust III.
Distributions on Euro Trust Securities are non-cumulative and are payable quarterly in arrears (on 15 March, 15 June, 15 September,
15 December of each year) based upon a floating distribution rate equal to 3 month EURIBOR rate plus a 66 basis point margin. At eachpayment date the 3 month EURIBOR rate is reset for the next quarter. Dividends are not payable on the preference share while it is stapled
to the note. If distributions are not paid on Euro Trust Securities, the Company may not pay dividends or return capital on its ordinary sharesor any other share capital or security ranking equal or below the preference share component.
Dividend Franking Account
The amount of franking credits available to the Company for the subsequent financial year is $78 million (2004: $111 million and 2003: nil),after adjusting for franking credits that will arise from the payment of tax on Australian profits for the 2005 financial year, $462 million of
franking credits which will be utilised in franking the proposed final dividend and franking credits that may not be accessible by the Company
at present.

86

Contingent liabilities
There are outstanding court proceedings,
claims and possible claims against theGroup, the aggregate amount of whichcannot readily be quantified.
In 2000, ANZ sold ANZ Grindlays Bankand certain United Kingdom and Jersey
businesses to Standard Chartered Bank
(SCB). ANZ provided warranties andcertain indemnities (including as totax) to SCB relating to those businesses
and, where it anticipated that payments
would be likely under the warranties orindemnities, made provisions to cover
the anticipated liability. Claims havebeen made under the tax indemnities.
In addition, ANZ may be held liable inrespect of certain Indian proceedings
involving Grindlays. No material impact
on the Group is expected.
The Group in Australia was during theyear subjected to client risk reviews by
the Australian Taxation Office (ATO) acrossa broad spectrum of matters, as partof normal ATO procedures. The reviews
mainly covered years up to 2003. Somematters have been listed by the ATO for
further investigation.
The ATO is also reviewing the taxation
treatment of certain other transactions
undertaken by the Group in the courseof normal business activities.
In addition, at the Company’s request the
ATO is reviewing the taxation treatmentof the sale of Grindlays in 2000. It is also
reviewing the transfer of the life and funds
management businesses into the joint
venture with ING in 2002.
During the year, the Company and the
ATO settled the remaining outstanding
issues from the large case tax audit which
commenced in 1995. The settlement waswithin existing provisions.
The Group in New Zealand is being
audited by the Inland Revenue Department(IRD) as part of normal revenue authority
procedures, with a particular focus on
certain kinds of structured financetransactions. The IRD has issued Noticesof Proposed Adjustment (the ‘Notices’)
in respect of some of those structured
finance transactions. The Notices are nottax assessments and do not establish
a tax liability, but are the first step ina formal disputes process. In addition,some tax assessments have been received.
Should the same position be adopted by
the IRD on the remaining transactions ofthat kind as reflected in the Notices andtax assessments received, the maximum
potential tax liability would beapproximately NZD432 million (includinginterest tax effected) for the period to
30 September 2005. Of that maximum
potential liability, approximately
NZD124 million is subject to tax indemnities
provided by Lloyds TSB Bank PLC under
the agreement by which ANZ acquired
the National Bank of New Zealand andwhich relate to transactions undertakenby the National Bank of New Zealand
before December 2003.
General or issue-specific audits andother investigations are being undertaken
by revenue authorities in the UnitedStates, the United Kingdom and in otherjurisdictions as part of normal revenue
authority activity in those countries.
Based on external advice, the Group has
assessed the likely progress of these andother issues, and believes that it holds
appropriate provisions.
Further details regarding Group contingent
liabilities are contained in the 2005
Financial Report.
Contingent asset
In 2003 ANZ issued proceedings in theSupreme Court of Victoria against its
captive insurance company ANZcoverInsurance Pty Ltd (ANZcover) regarding
its insurance claim consequent upon
settlement of its former subsidiary ANZ
Grindlays Bank Limited’s 1992 disputewith India’s National Housing Bank (NHB).
ANZcover is an authorised general insurer
restricted to insuring the interests of
ANZ and its subsidiaries. ANZcover inturn purchases reinsurance from global
reinsurers, primarily in the London
reinsurance market. ANZcover has no
retained exposure to the NHB claim,
which is fully re-insured, save for a small
exposure arising from the insolvency ofsome re-insurers in the London market.
The January 2002 settlement of the NHB
litigation saw Grindlays recover Rupees
6.20 billion ($248 million at 19 January
2002 rates) of the monies in dispute
between it and NHB, with NHB receiving
Rupees 10.25 billion ($413 million at
19 January 2002 rates). ANZ in turn received
a payment of USD124 million fromStandard Chartered Bank under the termsof an indemnity in the sale terms (refer
Note 47 in the 2005 Financial Report).
The claim against ANZcover of$130 million plus compound interest
is for the balance of the limit ofindemnity under ANZcover’s reinsurance
arrangements for the 1991–92 policy
year. The proceedings remain on foot.

financial statements87

7: SEGMENT ANALYSIS

8: CAPITAL MANAGEMENT

During the year ended 30 September 2005, the Group managed its activities along the following lines of business:

The Group’s total capital adequacy ratio was 10.5% (2004: 10.4%). The Tier 1 ratio remained at 6.9% (2004: 6.9%) and theTier 2 ratio reduced to 3.9% (2004: 4.0%).

Personal, Institutional, New Zealand Business, Corporate, Esanda and UDC, Asia Pacific and other. A description of each of theoperating business segments, including the types of products and services the segments provide to customers, is detailed in the2005 Financial Report.

Our principal capital management target is Adjusted Common Equity, defined as Tier 1 capital, less preference shares at current exchange rates
and deductions from total capital (including investment in funds management subsidiaries, ING Australia and ING New Zealand joint
ventures). Adjusted Common Equity was 5.1% of risk weighted assets at 30 September 2005 (2004: 5.1%).

As the composition of segments has changed over time, September 2004 comparatives have been adjusted to be consistent with the2005 segment definitions detailed in the 2005 Financial Report. Comparatives for the year ended 30 September 2003 have not been
provided as data could not reasonably be disaggregated into the changed segments.

9: EQUITY INSTRUMENTS ISSUED TO EMPLOYEESUnder existing Australian Accounting Standards, equity instruments issued to employees are not required to be expensed. The impact
of expensing options1, and shares issued under the $1,000 employee share plan, has been calculated and is disclosed below.

BUSINESS SEGMENT ANALYSIS1, 2
Consolidated
30 September 2005

Personal$m

Institutional$m

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

6,817(1,585)(3,128)3,169(2,581)
174

4,581(2,932)
(215)

1,078
(623)
242

1,143
(695)
(79)

172
(163)
154

467
(3,050)2,852

17,427(11,629)–

Net interest income
Other external operating income
Net intersegment income

2,104
1,013
125

762
1,433
(30)

1,434
513
6

697
294
(94)

369
121
(9)

163
149
–

269
29
2

5,798
3,552
–

Operating income

3,242

2,165

1,953

897

481

312

300

9,350

Other external expenses
Net intersegment expenses(1,363)
(276)

(623)
(143)

(950)
(5)

(232)
(62)

(162)
(26)

(172)
1

(1,013)511(4,515)–

Operating expenses(1,639)

(766)

(955)

(294)

(188)

(171)

(502)

(4,515)

Profit before debt provision and income tax
Provision for doubtful debts
Income tax and outside equity interests

1,603
(198)
(392)

1,399
(139)
(337)

998
(92)
(292)

603
(66)
(161)

293
(62)
(72)

141
(23)
(23)

(202)
–
40

4,835
(580)
(1,237)

Net profit after income tax

1,013

923

614

376

159

95

(162)

3,018

Total external assets

106,043

70,90160,157

21,263

15,4052,890

16,526

293,185

Total external liabilities

44,34053,35053,42624,11013,306

5,811

79,354

273,697

Corporate$m

Esandaand UDC$m

Asia
Pacific$m

Other3$m

Consolidated
Total
$m

Corporate$m

Esandaand UDC$m

Asia
Pacific$m

Other3$m

Consolidated
Total
$m

BUSINESS SEGMENT ANALYSIS1, 2

Consolidated
2004
$m

2003
$m

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

3,018

2,815

2,348

(5)
(20)
(23)

(8)
(23)
(22)

(8)
(24)
(18)

Total

2,970

2,762

2,298

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

10: EXCHANGE RATESThe exchange rates used in the translation of the results and the assets and liabilities of major overseas branches and controlled
entities are:
2005

Euro
Great British pound
New Zealand dollar
United States dollar

2004

2003

Closing

Average

Closing

Average

Closing

Average

0.63250.43251.09980.76230.60240.4142
1.08470.76570.5814
0.39831.07000.71650.59680.40541.12540.72630.58470.40701.14310.67950.56490.3822
1.11390.6124

11: EVENTS SINCE THE END OF THE FINANCIAL YEAR

Consolidated
30 September 2004

Personal$m

Institutional$m

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

5,784(1,334)(2,538)2,782(2,647)573

3,002(1,623)
(168)

919
(529)
250

1,060
(593)
(107)

167
(123)
109

403
(2,014)
1,881

14,117(8,863)–

Net interest income
Other external operating income
Net intersegment income

1,912
912
118

708
1,356
(23)

1,211
453
6

640
275
(86)

360
104
(8)

153
147
–

270
144
(7)

5,254
3,391
–

Operating income

2,942

2,041

1,670

829

456

300

407

8,645

Other external expenses
Net intersegment expenses(1,263)
(270)

(576)
(144)

(801)
(17)

(214)
(66)

(159)
(27)

(145)
2

(868)
522

(4,026)–

Operating expenses(1,533)

(720)

(818)

(280)

(186)

(143)

(346)

(4,026)

Profit before debt provision and income tax
Provision for doubtful debts
Income tax and outside equity interests

1,409
(183)
(343)

1,321
(160)
(304)

852
(97)
(242)

549
(61)
(147)

270
(67)
(60)

157
(23)
(23)

61
(41)
(53)

4,619
(632)
(1,172)

883

857

513

341

143

111

(33)

2,815

Total external assets

93,23260,14453,43419,098

14,5242,446

16,467259,345

Total external liabilities

40,454

48,74747,247

21,836

12,261

5,298

65,577

241,420

Net profit after income tax

2005
$m

There are no significant events since the end of the Financial Year.

1 Results are equity standardised
2 Intersegment transfers are accounted for and determined on an arm’s length or cost recovery basis
3 Includes Treasury, Operations, Technology and Shared Services, Corporate Centre, Risk Management, Group Financial Management and significant items

88

financial statements

89

DIRECTORS’ DECLARATION
The directors of Australia and New
Zealand Banking Group Limited declarethat in their opinion the accompanying
Concise Financial Report of theConsolidated Group for the year ended
30 September 2005 complies with
Australian Accounting Standard 1039
‘Concise Financial Reports’ and has
been derived from, or is consistent with,the full financial report for the year.
In our report on the Group’s 2005
Financial Report we declared that:a) in the directors’ opinion, thefinancial statements and notes of theCompany and the consolidated entity
have been prepared in accordance with
the Corporations Act 2001, includingthat they:i) comply with applicable Australian
Accounting Standards, and othermandatory professional reporting
requirements; andii) give a true and fair view of thefinancial position of the Company andof the consolidated entity as at 30
September 2005 and of their performanceas represented by the results of theiroperations and their cash flows, for theyear ended on that date;b) the directors have received thedeclarations required under section
295A of the Corporations Act 2001; andc) in the directors’ opinion, there arereasonable grounds to believe that theConsolidated Group will be able to pay
its debts as and when they become dueand payable.
Signed in accordance with a resolutionof the directors.

Charles Goode
Director

John McFarlane
Chief Executive Officer
2 November 2005

90

INDEPENDENT AUDIT REPORTON CONCISE FINANCIAL REPORTTO THE MEMBERS OF
AUSTRALIA AND NEW ZEALAND
BANKING GROUP LIMITEDSCOPE
We have audited the Concise Financial
Report of Australia and New Zealand
Banking Group Limited (“the Company”)
and its controlled entities for the financial
year ended 30 September 2005, consistingof the statement of financial performance,statement of financial position, statementof cash flows, accompanying notes 1 to 11
as set out on pages 82 to 89, the disclosures
made by the Company in accordance with
the Corporations Regulations 2001, andthe accompanying discussion and analysis
on the statement of financial performance,statement of financial position andstatement of cash flows as set out in pages
10 to 15, in order to express an opinion
on it to the members of the Company. The
Company’s directors are responsible for
the Concise Financial Report.
Our audit has been conducted inaccordance with Australian AuditingStandards to provide reasonableassurance whether the Concise Financial
Report is free of material misstatement.
We have also performed an independent
audit of the full financial report, including
the remuneration disclosures, of Australia
and New Zealand Banking Group Limited
and its controlled entities for the year
ended 30 September 2005. Our audit
report on the full financial report was
signed on 2 November 2005, and was
not subject to any qualification.
Our procedures in respect of the auditof the Concise Financial Report included
testing that the information in the Concise
Financial Report is consistent with the full
financial report and examination, on atest basis, of evidence supporting theamounts, discussion and analysis, andother disclosures which were not directly
derived from the full financial report.
These procedures have been undertaken
to form an opinion whether, in all material
respects, the Concise Financial Reportis presented fairly in accordance withAccounting Standard AASB 1039
“Concise Financial Reports”.

The audit opinion expressed in this reporthas been formed on the above basis.

SHAREHOLDER INFORMATION

AUDIT OPINION
In our opinion the Concise Financial
Report of Australia and New Zealand
Banking Group Limited and its controlled
entities for the year ended 30 September
2005 complies with AASB 1039 “Concise
Financial Reports”.

ORDINARY SHARES
KPMG

Mitch Craig
Partner
Melbourne
2 November 2005

COPY OF THE AUDITOR’SINDEPENDENCE DECLARATIONAt 6 October 2005 the twenty largest holders of ordinary shares held 1,093,451,133 ordinary shares, equal to 59.88% of the total issued
ordinary capital.
Name

Number of shares%

National Nominees Limited
Chase Manhattan Nominees Ltd
Westpac Custodian Nominees Limited

241,441,632
231,945,789
211,358,440

13.22
12.70
11.57

ANZ Nominees Limited
Citicorp Nominees Pty Limited
RBC Global Services Australia
Cogent Nominees Pty Limited
Queensland Investment Corporation

94,688,925
83,087,920
45,739,647
42,348,323
34,530,891

5.18
4.55
2.50
2.32
1.89

AMP Life Limited
HKBA Nominees Limited

21,834,046
19,077,099

1.20
1.04

Name

Westpac Financial Services Limited
PSS Board
Government Superannuation Office(A/C State Super Fund)
ANZEST Pty Ltd (Deferred Share Plan A/C)
Victorian Workcover Authority
IAG Nominees Pty Limited
Potter Warburg Nominees Pty Limited
Australian Foundation Investment
Company Limited
ANZEST Pty Ltd (ESAP Share Plan A/C)
Argo Investments Limited

Total

LEAD AUDITOR’S INDEPENDENCE
DECLARATION UNDER SECTION 307COF THE CORPORATIONS ACT 2001
I declare that, to the best of myknowledge and belief, during the financial
year ended 30 September 2005 there
have been: no contraventions of the auditor
independence requirements as set out
in the Corporations Act 2001 in relation
to the audit; andno contraventions of the applicable
Australian code of professional conduct
in relation to the audit.


Number of Shares%

10,171,351
9,624,619

0.56
0.53

9,246,458
7,452,747
6,134,825
5,616,166
5,047,035

0.51
0.41
0.34
0.31
0.28

4,952,049
4,888,899
4,264,272

0.27
0.27
0.23

1,093,451,133

59.88

Distribution of shareholdings
At 6 October 2005
Range

Number ofholders% ofholders

Number ofshares% ofshares1 to 1,000 shares
1,001 to 5,000 shares
5,001 to 10,000 shares
10,001 to 100,000 sharesOver 100,000 shares

141,605
97,213
14,938
9,494
424

53.70
36.87
5.67
3.60
0.16

62,595,320
213,663,024
104,117,087
199,330,580
1,246,754,193

3.43
11.70
5.70
10.91
68.26

Total

263,674

100.001,826,460,204

100.00At 6 October 2005:

there were no entries in the Register of Substantial Shareholdings;
the average size of holdings of ordinary shares was 6,927 (2004: 7,214) shares; andthere were 5,037 holdings (2004: 5,137 holdings) of less than a marketable parcel (less than $500 in value or 22 shares based on a market price of $23.22), which is less than 1.91% of the total
holdings of ordinary shares.

Voting rights of ordinary shares
The Constitution provides for votes to be cast:i) on show of hands, 1 vote for each shareholder; andii) on a poll, 1 vote for each fully paid ordinary share.
Mitch Craig
Partner
Melbourne
2 November 2005

ON-MARKET BUY-BACK
The Group commenced an on-market buy-back of $350 million of ordinary equity on 10 January 2005. Up until 15 September 2005, when
ANZ went into a voluntary black-out period for buying back shares, the Group had repurchased 9.6 million shares at an average cost of$21.15 per share. The buy-back period has been extended to 30 March 2006.

shareholder information91

PREFERENCE SHARES – ANZ STAPLED EXCHANGEABLE PREFERRED SECURITIES (ANZ StEPS)EMPLOYEE SHAREHOLDERINFORMATIONAt 6 October 2005, the twenty largest holders of ANZ StEPS held 4,767,053 securities, equal to 47.69% of the total issued securities.
Name

Number of securities%

ANZ Nominees Limited
Chase Manhattan Nominees Ltd

985,942939,3119.86
9.39

National Nominees Limited

862,043

8.62

Potter Warburg Nominees Pty Limited
Citicorp Nominees Pty Limited
UBS Nominees Pty Ltd (Prime Broking A/C)

347,659
268,835
182,902

3.48
2.69
1.83

Westpac Custodian Nominees Limited

178,604

1.79

UCA Cash Management Fund Ltd
The Australian National University
RBC Global Services Australia

152,500
135,000
124,675

1.53
1.35
1.25

Name

Austrust Limited
Share Direct Nominees Pty Ltd(Global Markets Account)
ANZ Executors and Trustee
Company Limited
Transport Accident Commission
Cogent Nominees Pty Limited
Gordon Merchant No 2 Pty Ltd(Merchant Family A/C)
Questor Financial Services Limited(TPS RF A/C)
Cambooya Pty LtdUOB Kay Hian Pte Ltd (Clients A/C)
Government Superannuation
Office (A/C State Super Fund)

Total

Number of securities%

81,1250.81

65,1210.65

61,56560,00059,549

0.62
0.60
0.60

59,0000.59

58,972
56,90047,350

0.59
0.57
0.47

40,000At the Annual General Meeting in January
1994, shareholders approved anaggregate limit of 7% of all classes ofshares and options,which remain subject to the rules of a
relevant incentive plan, being held byemployees and directors.
At 30 September 2005 participants held
2.41% (2004: 2.62%) of the issued
shares and options of ANZ under thefollowing incentive plans:

ANZ Employee Share Acquisition Plan;ANZ Employee Share Save Scheme;

0.40



ANZ Share Option Plan; and4,767,053

47.69



ANZ Directors’ Share Plan.

Distribution of ANZ StEPS holdings
At 6 October 2005
Range

Number ofholders1% ofholders

Number of
securities% ofsecurities

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

10,933
603
54
41
9

93.93
5.18
0.46
0.35
0.08

2,789,110
1,414,142
427,227
1,316,725
4,052,796

27.89
14.14
4.27
13.17
40.53

Total

11,640100.0010,000,000

100.00STOCK EXCHANGE
The Group’s ordinary shares are listedon the Australian Stock Exchange andthe New Zealand Stock Exchange.
The Group’s other stock exchange
listings include:

A preference share does not entitle its holder to vote at any general meeting of ANZ except in the following circumstances:

 Australian Stock Exchange –ANZ Stapled Exchangeable Preferred
Securities (ANZ StEPS) [ANZ Holdings(New Zealand) Limited and Australia and
New Zealand Banking Group Limited];senior and subordinated debt [Australia
and New Zealand Banking Group Limited];a) on a proposal:At 6 October 2005: There was 1 holder of less than a marketable parcel (less than $500 in value or 5 units) (2004: 2 holders)
1 Where a holder has 2 or more separate holdings, each holding is separately referred to in the above table.

Voting rights of ANZ StEPS(i) to reduce the share capital of ANZ;(ii) that affects rights attached to the preference shares;(iii) to wind up ANZ; or(iv) for the disposal of the whole of the property, business and undertaking of ANZ;b) on a resolution to approve the terms of a buy-back agreement;c) during the period in which a dividend which has been declared as payable on a dividend payment date has not been paid in full; ord) during the winding-up of ANZ.
If a poll is conducted on a resolution on which a holder is entitled to vote, the holder has one vote for each preference share held.

Channel Islands Stock Exchange –Subordinated debt [ANZ Jackson
Funding PLC];

 London Stock Exchange – Senior andsubordinated debt securities issued off
the Euro Medium Term Note program[Australia and New Zealand Banking
Group Limited and ANZ National (Int’l)Limited]; senior debt securities issued
off the US Medium Term Note program[ANZ National (Int’l) Limited]; Luxembourg Stock Exchange – Seniordebt [ANZ National Bank Limited] andsenior and subordinated debt [Australia
and New Zealand Banking Group Limited];
Non-cumulative Trust Securities[ANZ Capital Trust III];New Zealand Stock Exchange –Senior and subordinated debt
[ANZ National Bank Limited]; andSwiss Stock Exchange – Senior debt
[Australia and New Zealand Banking
Group Limited].


ANZ StEPS
In September 2003, 10 million ANZ
Stapled Exchangeable Preferred Securities(ANZ StEPS) were issued at an issue priceof $100.00 each. Each ANZ StEPS is astapled security comprising a Preference
Share in Australia and New Zealand Banking
Group Limited and an unsecured Noteissued by ANZ Holdings (New Zealand)
Limited. ANZ StEPS are quoted on theAustralian Stock Exchange.

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

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

 New York Stock Exchange – American
Depositary Receipts [Australia and
New Zealand Banking Group Limited];

92

shareholder information

93

GLOSSARY OF FINANCIAL TERMS
interest margin – a measure which tells
us how much interest we have generated
by lending money after accounting for ourcosts of borrowing that money, either from
customers or financial markets. Theinterest margin is calculated by dividing
net interest by average interest-earning
assets. This is expressed as a percentage.
investment securities – the investments
in securities that ANZ intends to holdto maturity.
adjusted common equity (ace) –Tier one capital less preference sharesat current rates and deductions from
regulatory capital.

customer liability for acceptances –the amounts owed to the Group from
customers for acceptances, a formof lending.

arrears – a contractually due
and payable sum which remains
overdue/unpaid.

deferred tax assets – the future
tax savings to the Group as a resultof timing differences that arise due todifferent treatment of transactions
under accounting and tax rules.

assets – resources controlled by theCompany. Assets can be in the form ofmoney, such as cash or amounts owed;
they can be fixed assets such as property
or equipment; or they can be intangibles
such as a company’s goodwill, trademarks
and patents. For accounting purposes,
assets are future economic benefits which
are controlled by the entity and result
from past transactions or events.
For banks, loans are assets.

the size, composition and risk profileof the current loan portfolio.
economic value added (eva™) –a measure of risk-adjusted accounting
profit. It is based on operating profit aftertax, adjusted for one-off items, the cost ofcapital, imputation credits and economic
credit costs.
liability – a company’s obligations toa lender, supplier of goods and services,a tax authority and others. For accounting
purposes, liabilities are future sacrificesof economic benefits that an entity is
obliged to make as a result of pasttransactions or events. For ANZ, liabilities
are largely money we have borrowed tofund our lending activities.

equity – the residual interest in theassets of a company after deducting all
liabilities. As a publicly listed company,
our shareholders own these net assets.
This is called shareholders’ equity.

liability for acceptances – the amountowed to customers who have purchased
customer acceptances from the Group.

loan capital – the long-term funding thatwould rank behind other creditors, andahead of only shareholders in the eventof a winding up.

capital adequacy ratio – a measure thatcompares our regulatory capital with our
risk-weighted assets.

dividend per share (dps) – theamount of the Company’s after tax
earnings declared and paid to ordinary
shareholders. It is usually expressed
as a number of cents per share, or as
a dividend per share.

equity standardisation – EVA™
principles are in use throughout theGroup, whereby risk adjusted capital isallocated and charged against Business
Units. Equity standardised profit isdetermined by eliminating the impactof earnings on each business unit’s bookcapital and attributing earnings on thebusiness unit’s risk adjusted capital.
This enhances comparability of business
unit performance. Geographic results
are not equity standardised.

cash earnings per share – earnings
per share excluding significant items
and goodwill amortisation.

due from other financial institutions– the monies owed to ANZ by other banks
and financial institutions.

franked dividends – dividends paid by
the company out of profits on which thecompany has already paid Australian tax.

consolidated statement of financial
position – a financial statement thatreports a company’s assets or resources
and the claims against them – including
liabilities or obligations of a businessand shareholders’ equity.

earnings per share (eps) – theamount, in dollars, of earnings divided
by the number of shares. For example, if
the earnings are $2 million and 1 million
shares are outstanding, the earnings per
share would be $2.00 ($2 million ÷
1 million shares = $2.00). The earnings
figure is based on profit after tax, withsome accounting adjustments.

full-time equivalent (fte) – our total
staff numbers based on the working
week. For example, two part-time staff inAustralia each working 20 hours a week
would be defined as one FTE as theirhours add up to 40 hours a week.

bonds and notes – the Group’s
liability for long-term financing issued
in wholesale markets.

cost to income ratio (cti) –a business efficiency measure. It’s theratio of our expenses (excluding goodwill
amortisation) to our income.
credit rating – a measurement of thecredit-worthiness of a business. AAA is
the top credit rating accorded by ratings
agencies such as Moody’s InvestorsService and Standard & Poor’s. The betterour credit rating, the cheaper we canborrow money from capital markets.
ANZ’s long-term credit rating is AA–.
credit risk – the potential for loss
arising from the failure of a customer
or counter-party to meet its
contractual obligations.

94

deposits and other borrowings –ANZ’s largest liability, this represents
ANZ’s obligations to our depositors.
dividend (interim) – the amount of
the Company’s after-tax earnings declaredand paid to shareholders at the halfyear results. It is usually expressed asa number of cents per share, or as
dividend per share.

economic loss provisioning (elp)(or provision for doubtful debts) –each month the Group recognises an
expense for credit losses based on the
expected long-term loss ratio for eachpart of the loan portfolio. The method
used by the Group for determining thismonthly expense charge is referred to as‘economic loss provisioning’ (ELP). The
Group uses ELP models to calculate theexpected loss by considering:
the history of credit loss for each typeand risk grade of lending; and

goodwill – the remaining amount, after
amortisation, of the historic excess over
net asset value paid by ANZ for theacquisition of other companies.
impaired assets – loans or other credit
facilities where there is reasonable doubt
about the collectability of interest, fees
(past and future) or principal outstanding,or where concessional terms have been
provided because of the financial
difficulties of the customer.
income tax liabilities – the amounts
payable in respect of income tax.

liquid assets – the cash or cash
equivalents held by ANZ.

market capitalisation of ordinary
shares – the stock market’s assessmentof a company’s value, calculated bymultiplying the number of shares on
issue by the current share price.
market risk – the potential loss
the Group may incur from changes tointerest rates, foreign exchange rates or
the prices of equity shares and indices,
commodities, debt securities and otherfinancial contracts, including derivatives.
It also includes the risk that the Group will
incur due to increased interest expenses
arising from funding requirements during
periods of poor market liquidity.
net loans and advances – ANZ’slargest asset by value, this consists of theloans ANZ has advanced to individuals
and organisations, less an allowance for
doubtful loan recoveries.
net profit after tax (npat) –a company’s net profit after all taxes,
expenses and bad debt provisions
have been deducted from theoperating income.
net specific provision – thetransfer from the general provision to thespecific provision (representing new andincreased specific provisions less specificprovision releases) less recoveries.

net tangible assets (nta) – theshare capital and reserves attributable toshareholders of the company less preference
shares and unamortised goodwill.
non-accrual loans – loans where
there is reasonable doubt about thecollectability of interest, fees (past andfuture) or principal outstanding, or whereconcessional terms have been provided
because of the financial difficulties of
the customer.
non-interest income – includes fees,
profits on capital markets trading, foreignexchange earning and any other revenue
that is not interest income.
numbers shown in brackets ( ) – thebrackets are there to indicate a negative
figure, instead of using a minus symbol.
operating revenue – the income ANZ
generates from its activities. This includes
net interest, fee income and earnings
from capital markets and foreignexchange dealings.
operational risk – the direct or indirectloss resulting from inadequate or failed
internal processes, systems or fromexternal events.
ordinary and preference share capital– the amounts received when shares wereoriginally subscribed for.
organic growth – where we have grownassets or liabilities through growth in our
existing businesses rather than throughacquisition of another company.
other assets – includes assets that
do not fit into the categories listed here
including the increase in market value ofamounts receivable from derivatives (referalso to ‘Payables and other liabilities’)
and interest accrued and not yet received.
payables and other liabilities –includes various operating creditors,
accrued interest payable and market valueof amounts payable on derivatives heldby the Group.
premises and equipment – the valueof all the land, buildings, furniture,equipment, etc. which are owned by
the Group.
profit per full-time employee –this productivity measure that shows,on average, how much profit is earned
by each staff member.
provisions – the Group’s accrued
obligations for long service leave, annual
leave and other obligations, which
although known, are not yet payable.
regulatory deposits – the cash ANZ
has deposited at central banks to meet
regulatory requirements.

reserves – retained profits plus
surpluses or deficits arising from, forexample, revaluations of properties,
foreign exchange gains or losses on
offshore operations.
retained profits – the amount of profits
retained by the Group.
return on equity (roe) – a calculation
which shows the return the company has
made on the money ordinary shareholders
have invested in ANZ. It is expressed asa percentage.
risk-weighted assets – the Group’s
assets adjusted for the risk of thecounter-party. The relative risk weight
for each counter-party is determined by
the Bank for International Settlements. For
example, a mortgage with a LVR (loan tovaluation ratio) below 80 per cent carries
a risk weighting of just 50 per cent.
service transfer pricing – is used toallocate services that are provided bycentral areas of the company to each ofits business units.
shares in associates – ANZ’s investment
in companies where the interest is large
enough to provide influence rather thancontrol over the company.
significant items – events which are‘one-off’ and not expected to be repeated.
These are described in detail within the
results. Special notations are made forany calculations which either include or
exclude these transactions.
specific provisioning – the Group
maintains a specific provision for
doubtful debts arising from its exposure toorganisations and credit counter-parties.
When it is identified that full repaymentof a loan on our book is unlikely, we will
create a specific provision for that loan.
tier one capital – the highest quality
capital from a prudential perspective.
It consists of paid-up ordinary shares,
general reserves, retained earnings,
and certain preference shares lessspecified deductions.
tier two capital – includes generalprovisions for doubtful debts (subject
to a limit), asset revaluation reserves,mandatory convertible notes and similar
capital instruments.
total shareholder return (tsr) –the percentage return to ordinary
shareholders from share pricemovements and dividends.
trading securities – the securities heldby ANZ that are regularly bought and soldas part of its normal trading activities.

glossary of financial terms

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