being different 2007 annual report ANZ

2007 Annual Report being different has its rewa r ds ANZ Annual Report 2007 1 Chairman’s Report 3 Overview of Operations 4 Overview of Business Divisions 6 Ten Year Summary 8 Directors’ Report 10 Principal Activities 10 Result 10 State of Affairs 10 Dividends 10 Review of Operations 10 Events Since the End of the Financial Year 10 Future Developments 10 Environmental Regulation 10 Directors’ Qualifi cations, Experience and Special Responsibilities 11 Company Secretaries’ Qualifi cations and Experience 11 Non-Audit Services 11 Lead Auditor’s Independence Declaration 12 Directors and Offi cers Who Were Previously Partners of the Auditor 12 Chief Executive Offi cer / Chief Financial Offi cer Declaration 12 Directors’ and Offi cers’ Indemnity 12 Rounding of Amounts 12 Executive Offi cers’ and Employee Share Options 12 Remuneration Report 14 Director Remuneration 14 Executive Remuneration 19 Chief Executive Offi cers’ Remuneration 22 Disclosed Executives’ Remuneration 25 Equity Instruments Relating to Disclosed Directors and Executives 26 Corporate Governance Report 36 Shareholder Information 50 Financial Report 54 Income Statements 54 Balance Sheets 55 Statements of Recognised Income and Expense 56 Cash Flow Statements 57 Notes to the Financial Statements 1 Signifi cant Accounting Policies 58 2 Critical Estimates and Judgements Used in Applying Accounting Policies 65 3 Income 68 4 Expenses 69 5 Compensation of Auditors 70 6 Income Tax Expense 71 7 Dividends 72 8 Earnings per Ordinary Share 74 9 Liquid Assets 74 10 Due from Other Financial Institutions 74 11 Trading Securities 75 12 Derivative Financial Instruments 75 13 Available-for-sale Assets 83 14 Net Loans and Advances 86 15 Impaired Financial Assets 87 16 Provision for Credit Impairment 88 17 Regulatory Deposits 89 18 Shares in Controlled Entities, Associates and Joint Venture Entities 89 19 Deferred Tax Assets 92 20 Goodwill and Other Intangible Assets 93 21 Other Assets 94 22 Premises and Equipment 94 23 Due to Other Financial Institutions 96 24 Deposits and Other Borrowings 96 25 Income Tax Liabilities 97 26 Payables and Other Liabilities 97 27 Provisions 98 28 Bonds and Notes 98 29 Loan Capital 99 30 Share Capital 102 31 Reserves and Retained Earnings 104 32 Minority Interests 105 33 Average Balance Sheet and Related Interest 106 34 Interest Spreads and Net Interest Average Margins 109 35 Financial Risk Management 110 36 Interest Rate Risk 122 37 Fair Value of Financial Assets and Financial Liabilities 123 38 Segment Analysis 129 39 Notes to the Cash Flow Statements 132 40 Controlled Entities 134 41 Associates 135 42 Interests in Joint Venture Entities 135 43 Fiduciary Activities 136 44 Commitments 137 45 Contingent Liabilities, Contingent Assets and Credit Related Commitments 138 46 Superannuation and Other Post Employment Benefi t Schemes 143 47 Employee Share and Option Plans 148 48 Key Management Personnel Disclosures 154 49 Transactions with Other Related Parties 155 50 Exchange Rates 155 51 Events Since the End of the Financial Year 155 Directors’ Declaration 156 Independent Auditor’s Report 157 Financial Information 1 Cross Border Outstandings 158 2 Certifi cates of Deposit and Term Deposit Maturities 158 3 Volume and Rate Analysis 159 4 Concentrations of Credit Risk 160 5 Provision for Credit Impairment – Industry Analysis 161 6 Short Term Borrowings 162 7 Capital Management 162 8 Additional Financial Instrument Risk Disclosures 166 Glossary of Financial Terms 170 Alphabetical Index 172 ANNUAL REPORT CONTENTS 2 ANZ Annual Report 2007 Chairman’s Report 3 OUR PERFORMANCE ANZ’s performance in 2007 was characterised by strong revenue growth and a prudent approach to risk. Our profit after tax for the year ended 30 September 2007 of $4,180 million was up by 13%. Cash profit 1 was $3,924 million, up by 9%. The dividend is 136 cents per share fully franked, a 9% increase on 2006. These results reflect the efforts of our management and staff, and I thank them for their contribution. EXPANSION AND GROWTH The Personal Division delivered another very strong result driven by revenue growth of 12%. In New Zealand we increased market share in a number of key segments and delivered improved financial performance. The Institutional Division had a mixed year but should perform better in 2008. We continued our expansion in Asia. We acquired an initial 19% of Malaysia’s AMMB Holdings Berhad; 20% of China’s Shanghai Rural Commercial Bank; 60% of the Vientiane Commercial Bank in Laos; 10% of Vietnam’s Saigon Securities Incorporation; and 100% of the Citizens Security Bank in Guam. In Australia, we completed the successful acquisition of ETRADE Australia Limited. We have committed approximately $1.5 billion to investments during 2007. Given this, we are taking the opportunity to enhance our strategic flexibility by offering a discount of 1.5% under our Dividend Reinvestment Plan, which is underwritten and expected to raise an additional $1 billion in capital. LEADERSHIP John McFarlane completed his term as Chief Executive on 30 September having occupied that position for ten years. John made an enduring contribution to ANZ’s development, especially in the areas of customer satisfaction, staff engagement, lifting our position in the community and consistently delivering on promises to shareholders. ANZ now has a strong foundation and on behalf of shareholders and the Board, I thank him for his contribution and service. Michael Smith commenced as Chief Executive on 1 October. Michael is an outstanding all round international banker. He joins us from HSBC where he had responsibility for HSBC’s business in Asia. David Gonski retired from the Board in June 2007. David made a significant contribution and we thank him. Ian Macfarlane, former Governor of the Reserve Bank of Australia, joined the Board in February 2007. OUTLOOK Looking ahead, there are some global uncertanties however the economies of Australia, New Zealand and Asia remain supportive of growth. ANZ remains in good shape, with a strong liquidity and funding position. We are well positioned for 2008. 2007 has been a year of achievement and change. ANZ has performed solidly during 2007, delivering value for shareholders, customers and the community. Our level of staff engagement grew and our approach to corporate responsibility gained increasing recognition. Looking ahead, we are conscious of the demands of increasing competition and the turbulence in world markets. Chairman’s report a message from Charles goode Charles goode Chairman 1 ANZ excludes from cash profit significant items, ANZ National Bank integration costs and volatility associated with fair value movements relating to economic hedges. 4 ANZ Annual Report 2007 Income Statement ($m) 2007 2006 Movt % Net interest income Other operating income 7,302 4,083 6,943 3,209 5% 27% Operating income Operating expenses 11,385 (4,953) 10,152 (4,531) 12% 9% Provision before credit impairment and income tax Provision for credit impairment 6,432 (567) 5,621 (407) 14% 39% Profi t before income tax Income tax expense Minority interest 5,865 (1,678) (7) 5,214 (1,522) (4) 12% 10% 75% Profi t attributable to shareholders of the Company 4,180 3,688 13% ANZ recorded a $492 million (13%) increase in profi t attributable to shareholders of the Company, from $3,688 million for the year ended 30 September 2006 to $4,180 million for the year ending 30 September 2007. Key factors infl uencing this increase were: Net interest income increased $359 million (5%) from $6,943 million for the year ended 30 September 2006 to $7,302 million for the year ended 30 September 2007. Net interest income was driven by average lending growth of 11% and average deposit growth of 8%, partially offset by a decline in net interest margin of 12 basis points. Other operating income increased $874 million (27%) from $3,209 million for the year ended 30 September 2006 to $4,083 million for the year ended 30 September 2007. The increase included a $195 million gain on sale from Fleet Partners Pty Limited and Truck Leasing Limited, and an increase over 2006 of $74 million arising on volatility from the use of derivatives in economic hedges and use of the fair value option. Operating expenses increased $422 million (9%) from $4,531 million for the year ended 30 September 2006 to $4,953 million for the year ended 30 September 2007. The increase was impacted by a $113 million cost recovery during 2006 following the settlement of a claim against a number of reinsurers in relation to the National Housing Bank (NHB) matter, partly offset by ANZ National Bank integration costs of $39 million incurred in 2006. Provision for credit impairment increased $160 million (39%) from $407 million for the year ended 30 September 2006 to $567 million for the year ended 30 September 2007. Income tax expense increased $156 million (10%) from $1,522 million for the year ended 30 September 2006 to $1,678 million for the year ended 30 September 2007. The effective tax rate was 28.6%, a reduction from 29.2% at 30 September 2006. The decrease includes the usage of capital losses which offset the capital gains made on the sale of Fleet Partners Pty Limited and other assets, and the non- assessable gain on the sale of Truck Leasing Limited, partially offset by the restatement of deferred tax balances for the announced New Zealand tax rate change which takes effect on 1 October 2008. Analysis in greater detail of business performance in major income and expense categories follows. NET INTEREST INCOME Net interest income increased $359 million (5%) to $7,302 million for the year ended 30 September 2007. Net interest income was driven by an increase in average interest earning assets of 11% and average deposit and other borrowings growth of 8%, partially offset by a decline in net interest margin of 12 basis points. The growth in average interest earning assets included an increase in Personal of 11% in lending assets, primarily in Mortgages, and from growth in retail loans and one-off borrowings following superannuation legislation changes. Institutional grew 9% as a result of continuing strong customer demand for debt products, especially in Relationship Lending in the latter part of the year and Business Banking. New Zealand Businesses grew 13% with robust growth across all businesses. Trading securities and available-for-sale assets grew by 16% refl ecting Institutional’s Debt Capital Markets’ strategy to expand their on-balance sheet trading portfolio and liquid assets. Average deposits and other borrowings increased 8% with customer deposits growing by 15%. Personal grew 13% as a result of ongoing marketing campaigns, in- OVERVIEW OF OPERATIONS ANZ recorded a profi t after tax of $4,180 million for the year ended 30 September 2007, an increase of 13% over the September 2006 year. Chief Financial Offi cer’s Report 5 branch promotions and simplifi cation of account opening procedures. Institutional grew 25%, mainly in Trade & Transaction Services resulting from customer acquisition and the impact of new superannuation laws. New Zealand grew 11% with growth in both Institutional and the Retail brands. Other deposits and borrowings decreased by 12%, primarily in the United States due to the wind up of the Group’s Delaware commercial paper program in February 2007. Net interest margin was down 12 basis points to 2.19% from September 2006 with the key drivers being: Competition (-9 basis points). Competitive pressures reduced margins, particularly in Australian and New Zealand Mortgages. In addition, net interest margin declined due to lower lending related fees and migration to high yielding deposits and low rate credit cards. Wholesale rates (+3 basis points). Earnings from the investment of capital and rate insensitive deposits increased, partially offset by an increase in basis risk on variable rate mortgages and credit cards. Other items (-6 basis points). NZD revenue hedging was included in interest income in prior periods, and in 2007 is included in foreign exchange earnings. Higher funding costs associated with unrealised trading gains (-3 basis points) were directly offset by an equivalent increase in trading income. OTHER OPERATING INCOME Other operating income increased $874 million (27%) to $4,083 million for the year ended 30 September 2007. Excluding the gain on sale from Fleet Partners Pty Limited and Truck Leasing Limited of $195 million, the increase of $74 million arising from volatility from the use of derivatives in economic hedges and the use of the fair value option and the $14 million received on settlement of ANZ National Bank claims during 2006, other operating income increased $619 million (20%). Fee income increased $235 million, largely in non-lending fee income following volume growth and revenue initiatives particularly within Consumer Finance, Investment and Insurance Products and Banking Products within Personal, and Corporate Finance and Working Capital within Institutional. Foreign exchange earnings and profi t on trading securities increased $160 million refl ecting growth in derivative positions in Markets, the funding of which is included in net interest income. Other income increased $184 million, including an increase in brokerage income of $39 million following the consolidation of ETRADE Australia Limited for the fi rst time as full ownership was achieved. The acquisition of Stadium Australia during the fi rst half of 2007 also contributed additional other income of $38 million. In addition, equity accounting income was higher in Partnerships and Private Bank due to increased earnings from INGA, a full year result from Bank of Tianjin and new investment in AMMB Holdings Berhad. OPERATING EXPENSES Operating expenses increased $422 million (9%) to $4,953 million for the year ended 30 September 2007. Excluding the impact of the $113 million cost recovery during 2006 in relation to NHB, and the ANZ National Bank integration costs of $39 million incurred in 2006, operating expenses increased $348 million (8%). Personnel costs were up $236 million (9%) as a result of annual salary increases and a 7% increase in staff numbers from acquisitions and additional staff to support new initiatives and business growth. Premises costs increased $51 million (12%), driven mainly by higher rental expense refl ecting additional space requirements, opening of new branches, additional ATMs and market rental growth. Computer costs increased $43 million (8%) from increased software purchases due mainly to internet banking licence fees and increased information system usage. Other expenses increased $18 million (2%) largely following an increase in Corporate Finance following the consolidation of Stadium Australia (mainly event costs). PROVISION FOR CREDIT IMPAIRMENT Provision for credit impairment increased $160 million (39%) to $567 million for the year ended 30 September 2007. The individual provision charge increased $146 million. Personal increased due to prior years’ growth in low rate cards, higher bankruptcies and increased servicing pressure from higher interest rates, housing costs and fuel prices. Esanda experienced lower realisable values on defaulted large motor vehicles due to the impact of higher fuel prices. New Zealand Businesses returned to more normal provisioning levels following higher than usual writebacks last fi nancial year. Institutional provisions have been infl uenced by two customers, offset by a substantial recovery in the fi rst half ($47 million). The collective provision charge increased $14 million. The charge for the year was driven by asset growth and changes in portfolio risk. This was partially offset by the continued release of the scenario impact provision taken in 2005 to refl ect the risk change due to materially higher and sustained oil prices. The increase in 2007 was primarily due to growth in New Zealand, which was partially offset by a lower charge in Personal from continued prudent management of unsecured lending, particularly in Consumer Finance (due to tightened credit standards, reduced business in certain segments and improved collections) and lower risk movement, particularly in Esanda. INCOME TAX EXPENSE Income tax expense increased $156 million (10%) to $1,678 million for the year ended 30 September 2007. Excluding the impact of the usage of capital losses which offset the capital gains made on the sale of Fleet Partners Pty Limited and other assets, the non-assessable gain on the sale of Truck Leasing Limited partially offset by the restatement of deferred tax balances for the announced New Zealand tax rate change which takes effect on 1 October 2008, the effective tax rate was 29.1%, a reduction from 29.3% at 30 September 2006. The decrease was due primarily to increased profi ts from associates (net of Australian top-up tax) and Offshore Banking Unit (OBU) benefi ts, partially offset by the run-off of structured fi nance transactions. 6 ANZ Annual Report 2007 PERSONAL DIVISION Income Statement ($m) 2007 2006 Movt % Net interest income Other operating income 3,282 1,411 3,017 1,166 9% 21% Operating income Operating expenses 4,693 (2,240) 4,183 (2,081) 12% 8% Provision before credit impairment and income tax Provision for credit impairment 2,453 (393) 2,102 (336) 17% 17% Profi t before income tax Income tax expense and minority interest 2,060 (618) 1,766 (527) 17% 17% Profi t after tax 1,442 1,239 16% Cost to income 47.7% 49.7% Employee numbers 14,096 12,913 9% Profi t after tax increased $203 million (16%) to $1,442 million for the year ended 30 September 2007. This increase was driven by strong lending and customer deposit growth and the benefi ts from ongoing investment in the business. Expansion of the footprint continued with 39 extra branches in 2007, a further 400 ATMs and 1,183 additional staff, mainly in customer-facing and transformation roles. Five months of ETRADE Australia results were consolidated as full ownership was achieved (an increase of $37 million operating income and $28 million in operating expenses). Operating income was up 12% driven by volume growth, partly offset by margin decline of 5 basis points. Consumer Finance grew 12% due to increasing volumes and the impact of growth initiatives. Banking Products increased 15% mainly from new customer accounts. Mortgages grew 6% with lending growth of 12% offset by higher funding costs and continued competitive pressure on margins. Operating expenses increased 8% due to additional branches, ATMs and frontline staff as part of the investment in building “Australia’s Most Convenient Bank”. Credit costs increased 17% mainly refl ecting volume growth, a strategic risk mix shift to low rate business, and higher delinquencies and bankruptcies in Consumer Finance. INSTITUTIONAL DIVISION Income Statement ($m) 2007 2006 Movt % Net interest income Other operating income 1,975 1,527 2,015 1,241 (2%) 23% Operating income Operating expenses 3,502 (1,378) 3,256 (1,256) 8% 10% Provision before credit impairment and income tax Provision for credit impairment 2,124 (69) 2,000 (58) 6% 19% Profi t before income tax Income tax expense and minority interest 2,055 (607) 1,942 (579) 6% 5% Profi t after tax 1,448 1,363 6% Cost to income 39.3% 38.6% Employee numbers 5,225 4,915 6% Profi t after tax increased $85 million (6%) to $1,448 million for the year ended 30 September 2007. The Markets business continued to benefi t from diversity of product and geographic cover, with sales revenue particularly strong. Corporate Finance continued to grow with Alternative Assets increasing Funds Under Management and strong returns from earlier investments in the Private Equity business, although revenue growth was slowed by the substantial decline in capital market activity in the last two months of the year. Trade & Transaction Services maintained steady growth and solid volume growth in Business Banking was impacted in the fi rst half by competitive pressures on margins on the secured lending book. Stadium Australia became a wholly owned subsidiary during the year as part of the Alternative Assets business (an increase of $35 million in operating income and $29 million in operating expenses). Operating income was up 8% driven by an increase of 7% in average net lending assets and 17% in average deposit and other borrowings volumes partially offset by a decline in net interest margin of 18 basis points. Strong revenue growth was achieved in Markets and Corporate Finance from increased customer activities. Operating expenses increased 10%, refl ecting an increase of 310 in employee numbers and continued investments in technology in Markets and Trade and Transaction Services. Provision for credit impairment increased 19% with two large individual provisions offsetting a large recovery in the fi rst half ($47 million). OVERVIEW OF BUSINESS DIVISIONS Overview of Business Divisions 7 NEW ZEALAND BUSINESSES Income Statement ($m) 2007 2006 Movt % Net interest income Other operating income 1,666 507 1,507 481 11% 5% Operating income Operating expenses 2,173 (1,034) 1,988 (987) 9% 5% Provision before credit impairment and income tax Provision for credit impairment 1,139 (69) 1,001 (4) 14% large Profi t before income tax Income tax expense and minority interest 1,070 (344) 997 (322) 7% 7% Profi t after tax 726 675 8% Cost to income 47.6% 49.6% Employee numbers 8,923 8,788 2% Profi t after tax increased $51 million (8%) to $726 million for the year ended 30 September 2007. Strong revenue growth, largely from continued momentum in lending growth, supported continued reinvestment in the business and the strengthening of the customer proposition. The result included an increase in credit impairment expense of $65 million from unusually low levels in 2006. Operating income was up 9% driven by robust balance sheet growth, with lending growth increasing 12% and customer deposits 7%, moderated by a 9 basis point contraction in margins. The disposal of the remaining MasterCard shares generated $9 million for the retail businesses ($4 million in 2006). Operating expenses increased 5% due to annual increases in salaries and investment in frontline staff and other business initiatives, partly offset by control of discretionary expenditure. The 2006 result included costs of $9 million in relation to the New Zealand Commerce Commission’s action on disclosure of optional issuer fees. The cost to income ratio reduced 200 basis points to 47.6%. Provision for credit impairment increased $65 million from $4 million in 2006, refl ecting high levels of recoveries and writebacks of past provisions in the Corporate and Business Banking portfolios last year. PARTNERSHIPS & PRIVATE BANK Income Statement ($m) 2007 2006 Movt % Net interest income Other operating income 133 289 107 208 24% 39% Operating income Operating expenses 422 (123) 315 (95) 34% 29% Provision before credit impairment and income tax Provision for credit impairment 299 (34) 220 (24) 36% 42% Profi t before income tax Income tax expense and minority interest 265 (18) 196 (12) 35% 50% Profi t after tax 247 184 34% Cost to income 29.1% 30.2% Employee numbers 1,574 1,102 43% Profi t after tax increased $63 million (34%) to $247 million for the year ended 30 September 2007. INGA earnings were up 27% driven by increased funds management activities. ANZ Private Bank profi t after tax increased 16% with volume growth and increased sales of advisory and alternative investment products. 2007 also included signifi cant Partnership activity with the completion of investments in AMMB Holdings Berhad in Malaysia, ANZ Vientiane Commercial Bank in Laos and Shanghai Rural Commercial Bank in China. Operating income was up 34% primarily from volume growth in Indonesia Cards and Personal and Private Bank business in Asia. In addition, INGA equity accounted income was up 27% refl ecting strong core operating profi t benefi ting from superannuation legislation changes, buoyant investment markets and higher capital investment earnings. International Partnerships other operating income increased 73% as a result of stronger Panin earnings, the full year impact of new partnerships and the fi rst time booking of a full quarter of earnings from AMMB Holdings Berhad. ANZ Private Bank other income increased 62% due to higher income from the distribution of alternative investment and advisory products. Operating expenses increased 29% as a result of ongoing investment across all of the businesses. Provision for credit impairment increased 42% due to the impact of regulatory changes and business volume growth in Indonesia Cards. 8 ANZ Annual Report 2007 2007 $m 2006 $m 2005 $m 2004 $m Financial Performance 1 Net interest income Other operating income Operating expenses Profi t before income tax, credit impairment and non-core items 1 Provision for credit impairment Income tax expense Minority interest Cash profi t 1 Non-core items 1 7,302 3,765 (4,953) 6,114 (567) (1,616) (7) 3,924 256 6,943 3,146 (4,605) 5,484 (407) (1,486) (4) 3,587 101 6,371 2,935 (4,340) 4,966 (565) (1,247) (3) 3,151 24 5,252 3,267 (4,005) 4,514 (632) (1,147) (4) 2,731 84 Profi t attributable to shareholders of the company 4,180 3,688 3,175 2,815 Financial Position Assets 2 Net Assets Tier 1 capital ratio 3 Return on average ordinary equity 4,5 Return on average assets 4 Cost to income ratio 6 392,613 22,048 6.7% 19.6% 1.1% 44.8% 334,640 19,906 6.8% 20.1% 1.1% 45.6% 300,885 19,538 6.9% 19.0% 1.1% 46.6% 259,345 17,925 6.9% 17.8% 1.1% 45.3% Shareholder value – ordinary shares Total return to shareholders (share price movement plus dividends) Market capitalisation Dividend Franked portion –interim –fi nal Share price 7 –high –low –30 Sep 15.6% 55,382 136c 100% 100% $31.50 $25.75 $29.70 17.1% 49,331 125c 100% 100% $28.66 $22.70 $26.86 32.6% 43,834 110c 100% 100% $24.45 $19.02 $24.00 17.0% 34,586 101c 100% 100% $19.44 $15.94 $19.02 Share information (per fully paid ordinary share) Earnings per share 7 –basic Dividend payout ratio 8 Net tangible assets per ordinary share 9 No. of fully paid ordinary shares issued (millions) Dividend Reinvestment Plan (DRP) issue price –interim –fi nal 224.1c 60.9% $9.37 1,864.7 $29.29 – 200.0c 62.6% $8.53 1,836.6 $26.50 $28.25 169.5c 65.0% $7.77 1,826.4 $21.85 $23.85 153.1c 67.5% $7.51 1,818.4 $17.84 $19.95 Other information Points of representation 10 No. of employees (full time equivalents) No. of shareholders 11 1,327 34,353 327,703 1,265 32,256 291,262 1,223 30,976 263,467 1,190 28,755 252,072 1 ANZ excludes from cash profit significant items, ANZ National Bank integration costs and volatility associated with ineffectiveness arising from designated accounting hedges, volatility arising from the usage of the fair value option and volatility from approved classes of derivatives not designated in accounting hedge relationships but that are considered to be economic hedges. ANZ excludes these items to provide a better indication of the underlying business performance. In addition, the 2005 result has been calculated on an AIFRS basis that is comparable with 2006 with the net effect of these adjustments included in non-core items, allowing readers to see the impact on 2005 results of accounting standards that have only been applied from 1 October 2005. 2 From 1998 to 2001, consolidated assets include the statutory funds of ANZ Life as required by an accounting standard. For the year 2004, consolidated assets include the statutory funds of NBNZ Life Insurance Limited. ANZ Life was sold in May 2002 and NBNZ Life Insurance was sold on 30 September 2005. 3 Calculated in accordance with Australian Prudential Regulation Authority requirements effective at the relevant date. 4 Excludes non-core items and minority interest. The 2005 ratio has been calculated on an AIFRS basis that is comparable with that of 2006. TEN YEAR SUMMARY [...]... (“AMMB”) In June 2007 ANZ finalised its acquisition of ETRADE Australia Limited In July 2007 ANZ acquired 100% of Citizens Security Bank in Guam In August 2007 ANZ acquired 10% of Saigon Securities Incorporation In September 2007 ANZ acquired a 20% investment in Shanghai Rural Commercial Bank In September 2007 ANZ acquired 60% of the ANZ Vientiane Commercial Bank in Laos During the year, ANZ applied for... million, primarily to fund asset growth 10 ANZ Annual Report 2007 Further details are contained on pages 4 to 7 of this Annual Report STATE OF AFFAIRS In the directors’ opinion, there have been no significant changes in the state of affairs of the Group during the financial year, other than: In October 2006, ANZ sold the Esanda Fleetpartners business In May 2007, ANZ acquired an initial 19% investment in... Directors’ Report 13 REMUNERATION REPORT Introduction This Remuneration Report details ANZ s remuneration policies which apply to key management personnel (KMP) and ANZ executives classified as “secretaries or senior managers” as defined in the Corporations Act The report identifies the link between remuneration and ANZ s performance, and individual outcomes relating to remuneration and equity for ANZ s directors... previous employer on joining ANZ As per the terms of M Smith’s contract, he elected at the commencement of his employment to receive 100% of this compensation in the form of ANZ Deferred Shares Shareholder approval will be sought at the 2007 Annual General Meeting for M Smith’s sign-on award, to be held in trust until the end of the relevant vesting period 24 ANZ Annual Report 2007 One third of the sign... shares are held by ANZEST Pty Ltd as the trustee for shares issued under the terms of any ANZ employee incentive plan Ten Year Summary 9 DIRECTORS’ REPORT The directors present their report together with the Financial Report of the consolidated entity (the Group), being Australia and New Zealand Banking Group Limited (the Company) and its controlled entities, for the year ended 30 September 2007 and the... variations include: i) E Funke Kupper only disclosed in 2006 based on the four month period he was classified as a KMP; not included in 2007 totals ii) Inclusion of A Thursby in 2007 totals for the 1 month period he was a KMP (i.e commenced 3 September 2007) 16 ANZ Annual Report 2007 LONG-TERM EMPLOYEE BENEFITS SHARE-BASED PAYMENTS5 Long service leave accrued during the year $ Total amortisation value of STI... ended 30 September 2007, refer to Table 1 in section A of this Remuneration Report NED SHAREHOLDING GUIDELINES NEDs have agreed to accumulate ANZ shares, over a five-year period, to the value of 100% (200% for Chairman) of the base annual NED Fee (i.e $192,000 for 2006 /2007) and to maintain this shareholding while a director of ANZ NEDs have agreed to apply up to 25% of their base fee annually through... Business Divisions on pages 3 to 7 of this Annual Report EVENTS SINCE THE END OF THE FINANCIAL YEAR There were no significant events from 30 September 2007 to the date of this report FUTURE DEVELOPMENTS Details of likely developments in the operations of the Group and its prospects in future financial years are contained in this Annual Report under the Chairman’s Report In the opinion of the directors,... $5,768; S Targett nil 4 E Funke Kupper forfeited unvested deferred shares on resignation 28 ANZ Annual Report 2007 F5 DEFERRED SHARES GRANTED TO DISCLOSED EXECUTIVES (CONTINUED) Financial Year 2006 2007 Number granted2 Number that vested during the 2006 or 2007 year Percentage that vested during the 2006 or 2007 year % 6,423 5,622 6,781 7,683 26,509 8,554 4,148 7,636 7,052 27,390 4,457 1,992 7,322... their incentive towards the purchase of ANZ shares which are restricted from sale for 12 months, or towards additional superannuation contributions As the incentive amount has already been earned, there are no performance measures attached to the shares The target STI award 20 ANZ Annual Report 2007 level for disclosed executives is 100% of Fixed Remuneration in 2007 with a maximum STI award of 150% . 2007 Annual Report being different has its rewa r ds ANZ Annual Report 2007 1 Chairman’s Report 3 Overview of Operations 4 Overview of Business Divisions 6 Ten Year Summary 8 Directors’ Report. Financial Terms 170 Alphabetical Index 172 ANNUAL REPORT CONTENTS 2 ANZ Annual Report 2007 Chairman’s Report 3 OUR PERFORMANCE ANZ s performance in 2007 was characterised by strong revenue growth. DIRECTORS’ REPORT CONTINUED Directors’ Report 13 This page has been left blank intentionally. 14 ANZ Annual Report 2007 REMUNERATION REPORT Introduction This Remuneration Report details ANZ s remuneration