ANZ Annual Report 2001 The Bank with a human face This is a chronicle of 12 months in our organisation, the events that mattered, the impacts they made and the way we dealt with them. The past year has been about recognising realities and facing them. About technology, people, leadership and having a go. And if you’re an ANZ customer, staff member or shareholder, it’s about you. To us, “growth” no longer means simply being a bigger version of what we were before. To truly grow today, we must break out from old paradigms, be different from what we have been in the past and distinct from what our competitors are today. The following pages aim to give you a clear and transparent look at the 12 months from October 2000 to September 2001. As a shareholder, you’ll learn more about how your investment grew in value. You’ll also know more about how ANZ grew in strength, in scope and in creativity. And perhaps, most importantly, you’ll have a clearer picture of where we intend to go in the future, how well we’re equipped to meet our objectives, and what foundations are being laid to help our customers, our staff and you, as our shareholder, grow with ANZ. 02 Chairman’s letter to shareholders 04 Chief Executive Officer’s overview 06 ANZ Overview 08 Chief Financial Officer’s review 12 Personal Financial Services 22 Corporate Financial Services 30 International and Subsidiaries 34 New Zealand 36 Risk Management 38 ANZ and Technology 42 Our People 44 The Community and the Environment 46 Board of Directors 48 Corporate Governance 49 Concise Financial Report ANZ Annual Report 2001 Chairman’s Letter to Shareholders 02 03 Prudence, performance, and momentum. ANZ has again delivered on our promises to shareholders. In the year ended 30 September, 2001, earnings per share grew by 10% to $1.17 and the dividend per share was increased by nine cents to 73 cents per share fully franked. The net operating profit after tax increased by 7% to $1,870 million, a new record for the company. Our return on ordinary shareholders’ equity at 20.2% passed our 20% target and our cost income ratio was 48.3%. Our tier one capital was solid at 7.5%. It is also pleasing to see this performance reflected in the share price, which rose by over 20% during the year and recorded all-time highs. Management and staff are to be complimented for these achievements, which reflect a focussed approach to cost controls, risk management, and business generation, combined with good execution of a well thought out strategy. During the year we moved to have a strategy focussed on 16 specialist businesses. We continued our application of eCommerce to both our internal organisation and to communication with our customers. We moved to be far more customer-oriented in our personal businesses and sought to improve our culture and values within the company and in our relations with customers. We have maintained continued attention to the control of our risk exposures. We have sought to energise our staff to be bold and think differently about how things are done and to take the initiative and make a difference for their teams and their customers with our “Breakout” program. Our attention to people development and customer focus has been elevated to equal importance with financial performance. Our philosophy is to ensure that staff excel in their own business unit and also work collaboratively for the success of ANZ as a whole. This approach is helping to foster a new spirit in the organisation, and assisting us to reach out and connect more strongly with our customers and the community. On 8 October 2001, Mr Gary Toomey resigned from the Board and I wish to express our appreciation of the contribution he made to our deliberations since his appointment in March 1998. In looking to the year ahead we see continued progress in a more difficult environment. We expect some deterioration in credit quality in line with the weaker economic conditions. We also see opportunities for growth in many of our businesses and are optimistic that the Bank has the strategy and management capability to continue to grow, although at a more subdued rate. Charles Goode Chairman ANZ Annual Report 2001 Chief Executive Officer’s Overview 04 05 A strong foundation with new momentum. Specialise, eTransform, Perform, Grow and Breakout. I am pleased to report another record result with the 2001 profit up 7% on last year (18% excluding discontinued businesses). Our good first half performance was repeated in the second half, despite the more subdued economy and weaker credit environment. All but one of our specialist businesses grew their profits during the year, and all but four had double digit earnings growth. This demonstrates the robustness of our strategy, our disciplined management and risk approach, and the strength and depth of our management team. It emphasises our focus on growing the top line, our caution on risk, our rigour on capital allocation, and our decisiveness on costs. The past four years has seen a major transformation of ANZ. We now have a more sustainable and balanced business mix, improved positions in a number of growth sectors, industry leading productivity, and considerably lower risk. The current uncertainties in the Middle East and South Asia provide further affirmation of our decision to sell Grindlays. All of this has resulted in a record share price, market capitalisation, and shareholder dividend. The Australian and New Zealand economies are currently performing relatively well, but it is likely that the higher level of uncertainty will have a tangible effect. We are closely monitoring the situation and are preparing contingency plans to mitigate any adverse impact should the situation deteriorate. This will see us in a position to take appropriate action quickly, should this be necessary. We will continue to invest in selected growth segments and to improve the sustainability of our business mix. We are also paying particular attention to customer and staff satisfaction, in building our strategic position in our core businesses, and in earning the trust of the community. We have plans for a major transformation of our branch network domestically over the next few years. Additionally, strategic opportunities at reasonable values are likely to present themselves, and we believe this will play to our advantage. As examples, we recently acquired a 75% shareholding in Bank of Kiribati and signed contracts to acquire Bank of Hawaii’s businesses in Fiji, Papua New Guinea and Vanuatu. We expect a slowing in revenue opportunities until such time as the economy rebounds. The credit environment is likely to remain subdued, but barring significant deterioration, losses will be containable. We are accordingly taking a deliberately cautious approach to our business, and will continue to manage costs toward a cost income ratio in the mid-40’s, and constrain asset growth in economically sensitive areas. Taking account of all factors, we remain positive about future performance, and are leaving our 2002 and 2003 financial targets unchanged. John McFarlane Chief Executive Officer We have made good progress with our other stakeholders. The number of customers and market share across most measures has increased. Staff satisfaction has improved substantially. We have also taken a number of steps to earn the trust of the community, including a new ANZ Customer Service Charter, free transactional banking for those over 60, major concessions for Centrelink and Health cardholders and our moratorium on regional branch closures. Of course, not everything has worked in our favour, and there are areas where we are not doing as well. Although we have made progress in the areas of customer and community satisfaction, we have a great deal yet to do. It is well known that banks are not held in high regard by personal customers or by the community. Changing this perception of ANZ and contributing to changes in the wider industry is a major priority of ours over the next few years. Again, while we have made substantial progress in Personal Financial Services, we remain underweight strategically in this area. In particular we need to increase the number of customers in Metrobanking, Regionalbanking and Small to Medium Business. We also need a stronger position in Wealth Management. We are also facing substantial competition for deposit funds, constraining our ability to grow assets – particularly from alternative investments. Plans are in place to increase deposits, but the real solution lies in diversifying our business by growing alternative revenue streams. This year we launched the “Breakout” program to create a sustainable high performance culture at ANZ. One thousand of our top managers have now been through the program, and we are planning to extend this to 6,000 this year. We believe this initiative will be the foundation for sustainable performance differentiation in future years. As we predicted in the first half, we have seen deterioration in asset quality in Australia as a result of the recent downturn. This has been evidenced particularly through some large corporate collapses and our specific provisions have therefore risen. To reflect the potential risk arising from global economic uncertainty and the events of September 11th, we increased the economic loss provision (ELP) for the year by $41 million. Our specific provisions are now broadly in line with ELP for the year, albeit higher for the second half. We have provided for all known problem exposures. ANZ Annual Report 2001 ANZ Overview 06 07 ANZ Overview The Bank with a human face > Put our customers first > Perform and grow to create value for our shareholders > Lead and inspire each other > Earn the trust of the community > Breakout, be bold and have the courage to be different Group Profit after Tax – Operating Segments Personal 46% Corporate 39% Int & Subs 15% Group Personal Corporate International & Subsidiaries Profile The Bank with a human face Profile Realising our unique growth opportunities Profile Dynamic, leading and growing > 22,501 employees > $185b assets Key Businesses > Personal Financial Services > Corporate Financial Services > International & Subsidiaries Significant Events 2001 > Implemented specialist business model > Established a customer charter > Completed $1b buyback > Launched new Breakout Culture program > Launched staff volunteering program > Record share price Performance > Profit $1,870m > Return on Equity 20.2% > Cost Income 48.3% > Asset growth 8% > Staff Satisfaction 62% Targets The group has committed to achieving the following targets by 2003: > EPS growth > 10% > Return on Equity > 20% > Cost Income ratio – mid 40% range > Inner Tier 1 Capital – 6.0% > Maintain AA category credit rating > 11,474 employees > 4 million customers (Australia) > 1 million customers (NZ) > 775 branches (Australia) > 143 branches (NZ) > 750,000 internet banking customers (Australia) > 170,000 internet banking customers (NZ) Key Businesses > Mortgages > Metrobanking > Regionalbanking > Wealth Management > Small to Medium Business > Cards & ePayments More details about these businesses on pages 12–17 Significant Events 2001 > Australian Savings Institution of the Year > Home Lender of the Year > On-line Bank of the Year > Best investment/financial website > Best Internet Bank in Australia and NZ > Doubled the number of internet customers Performance > Profit $879m > Income growth 9% > Cost Income 52.6% > Asset growth 10% > Staff Satisfaction 55% Targets > Increase profit by 15%+ pa to 2005 > Add 1 million new customers by 2005 > Double customer and staff advocacy by 2004 > 3,126 employees > 10,000 customers Key Businesses > Corporate Banking > Institutional Banking > Global Foreign Exchange > Global Structured Finance > Global Transaction Services > Global Capital Markets More details about these businesses on pages 22–27 Significant Events 2001 > Best FX Bank Australia > #1 Commercial Paper Australia & NZ > #1 Project Finance Loan Arranger Asia Pacific > #1 Overall Customer Satisfaction (Global Transaction Services) > #1 Overall Customer Satisfaction (Corporate & Institutional Banking) Performance > Profit $737m > Income growth 14% > Cost Income 38.5% > Asset growth 5% > Staff Satisfaction 68% Targets > Profit after tax of $1b by 2004 > Maintain our #1 position in client satisfaction > Attain a top 3 position in each of our core businesses > Achieve a cost income ratio in the 30% range Profile Leveraging strengths for growth > 3,799 employees > 1 million customers Key Businesses > Asia > Pacific > Asset Finance > ANZ Investments More details about these businesses on pages 30–33 Significant Events 2001 > New operations in East Timor, American Samoa and Kiribati > Announced purchase of Bank of Hawaii operations in PNG, Vanuatu, Fiji > Improved quality of loan portfolio in Asia > Significant efficiency improvements in asset finance > Launched new ANZ Investments brand Performance > Profit $284m > Income growth 7% > Cost Income 48.2% > Asset growth 8% > Staff Satisfaction 65% Targets > Grow the network business in Asia by leveraging core Group capabilities > Continue expanding in new and existing markets in the Pacific > Strengthen leading position in Asset Finance > Finalise joint venture with a major global fund manager Personal Corporate Mortgages 12% Metrobanking 10% Regionalbanking 9% Wealth Management 3% Small Business 6% Cards & ePayments 6% Corporate Banking 7% Institutional Banking 10% Global Foreign Exchange 5% Global Structured Finance 7% Global Transaction Services 7% Global Capital Markets 3% International & Subsidiaries Asia 3% Pacific 3% Asset Finance 5% ANZ Investments 4% Net Profit after Tax $m 2400 2000 1600 1200 800 400 0 group personal corporate int & subs dbus & abn 2000 2001 dbus - discontinued business abn - abnormals ANZ Annual Report 2001 Chief Financial Officer’s Review 08 09 Another year of growth and increased shareholder returns. The figures are in and they tell a positive story. Earnings, dividends per share, income and profit are all ‘up’. We have good momentum in a more difficult environment. Earnings and Dividends per Share Up Higher Return on Equity ¢ 120 100 80 60 40 20 0 -20 -40 -60 -80 % 30 25 20 15 10 5 0 -5 -10 -15 -20 91 92 93 94 95 96 97 98 99 00 01 91 92 93 94 95 96 97 98 99 00 01 Earnings Per Share Dividends Per Share Increased Earnings & Dividends per share growth > Earnings per share 117.4 cents; up 10% (2000 – 106.8 cents). > Dividends per share 73 cents; up 14% (2000 – 64 cents). > Payout Ratio 62.0% (2000 – 59.1%). > Franking 100% interim, 100% final (2000 – 100% interim, 100% final). We exceeded our Return on Equity target of 20% > The Group has achieved its goal of a Return on Equity greater than 20% two years earlier than targeted, with a Return on Equity of 20.2%. > Increase in Return on Equity is primarily due to Return on Assets improving from 1.05% to 1.07%. > Profit attributable to members of the company $1,870m – up from $1,747m notwithstanding the sale of Grindlays in 2000. > Average ordinary shareholders’ equity $8,666m (2000 – $8,451m). Overall Staff Satisfaction CFO’s Unit % 100 80 60 40 20 0 1999 2000 2001 “ Another positive performance after four years of strategic repositioning.” Peter Marriott Chief Financial Officer ANZ Annual Report 2001 Chief Financial Officer’s Review 10 11 Year on Year Profit Comparison Solid Income Growth* We are Capitalised above Regulatory Levels Value of $1000 invested in 1991 $m 2400 2200 2000 1800 1600 1400 1200 1000 $m 7500 6500 5500 4500 3500 2500 1500 500 0 NPAT 2000 DBus Rev Exp Pro Tax NPAT 2001 NPAT - Net Profit after Tax DBus - Discontinued Business and Abnormals - Revenue Rev Exp - Expenses Pro - Provisions - Income Tax Tax Profit growth of 7% > During the 2000 year, ANZ sold or discontinued a number of businesses, including Grindlays. In 2000, these businesses contributed a net profit of $106m. > 2000 also included a net abnormal gain of $44m. > Notwithstanding these factors profit grew by 7% (2000 – $1,747m; 2001 – $1,870m). > For continuing businesses, profit increased 18%, from $1,597m to $1,882m. A 2% decrease in the Australian corporate tax rate boosted profits by $36m. > This was a good profit result driven by revenue growth and cost containment, offset by higher provisions. 91 92 93 94 95 96 97 98 99 00 01 Net Interest Non Interest *Excluding Abnormals Operating income > On a reported basis, net interest income grew 1%, from $3,801m in 2000 to $3,833m in 2001. For continuing businesses, net interest income was up 10%, driven by growth in average loans and advances of 10%, and by overall margins increasing from 2.75% to 2.77%. > Non-interest income was up 1%, however for the continuing businesses increased by 12%. This result was driven by: – Institutional Banking – up 23% – Asia – up 25% – Pacific – up 22% – Cards – up 24% – Global Foreign Exchange – up 19% – Wealth Management – up 17% Cost Income Ratio Lower* Movement in General Provision $m 3600 3400 3200 3000 2800 2600 % 75 70 65 60 55 50 45 40 $m 2200 1800 1400 1000 600 200 Surplus 91 92 93 94 95 96 97 98 99 00 01 Expenses Cost Income *Excluding Abnormals Sept 2000 ELP NSP FXI Sept 2001 APRA ELP - ELP Charge NSP - Net SP Transfer FXI - FX Impact APRA - APRA Guideline Progress in meeting our Cost Income Ratio commitment > In 2000, we made a commitment to reduce our cost income ratio to the mid 40’s by 2003. > Our cost income ratio has reduced to 48.3%. > The reduction in the cost income ratio in 2001 was primarily the result of income growth and tight cost containment as all businesses focussed on increasing efficiency and lowering discretionary spending. > During the year, acquisitions and GST increased expenses by $76m, largely accounting for the increase in expenses on a continuing basis from $3,024m in 2000 to $3,128m in 2001. > On a reported basis, expenses were down 6%, from $3,314m in 2000 to $3,131m in 2001. Asset quality > Reflecting the challenging economic environment, net specific provisions increased from $383m in 2000 to $520m in 2001. > Economic Loss Provision (ELP) increased moderately from $502m to $531m. > The ELP charge was increased by $41m, based on modelling of the estimated impact of the weakening economic environment following the September 11 US terrorist attacks. > Risk profiles continue to be closely monitored. > Non-accrual loans declined from $1,391m in 2000 to $1,260m in 2001, assisted by write-offs and debt sales. > Our general provision of $1,386m remains well above the APRA guideline ($1,014m). % 9 8 7 6 5 4 3 2 1 0 $b 140 135 130 125 120 115 110 105 $ 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Mar 1999 Sept 1999 Mar 2000 Sept 2000 Mar 2001 Sept 2001 Inner Tier 1 Tier 1 RWA’s 91 92 93 94 95 96 97 98 99 00 01 Financial Goals ANZ is committed to maximising returns to shareholders. To achieve this going forward, we have set ourselves the following financial goals: > Earnings per share growth greater than 10%. > Return on Equity above 20%. > Cost income ratio in mid 40’s by September 2003. > Inner Tier 1 capital of 6%. > Maintain credit rating in AA category. Balance Sheet Management > During the 2001 financial year, ANZ completed a $1b on market buyback. > The dividend payout ratio increased from 59.1% to 62.0%. > Inner Tier 1 capital has remained steady at 6.4%, which is above our target of 6.0%. However we believe it is prudent to carry a higher level of capital given the current economic environment. > Balance sheet growth in Corporate and Institutional Banking is deliberately constrained as ANZ re-balances its lending portfolio. Consumer lending in Australia and New Zealand increased to 55% of net assets (2000 – 52%). $2.5b of mortgages were securitised during the year. Bruce Brook Deputy Chief Financial Officer Rick Sawers Group Treasurer ANZ Annual Report 2001 Personal Financial Services Realising our unique growth opportunities. Financial Performance. Customer advocacy. Staff pride and fulfilment. Our Personal portfolio is comprised of six specialist businesses. Together they serve more than five million individuals, families and small businesses. Our customers range from young children to senior members of the community. People of modest means and the very wealthy. Diverse in race, gender, occupation, education and aspiration. For all this diversity, however, nearly all have faced profound and numerous changes in the ways they can access our bank and its products. These changes produced seemingly conflicting results. On the one hand, we increased our customer base by 600,000 over the past two and a half years while delivering outstanding results – a tribute to many of our new products and services, as well as the efforts of many people who made them come into fruition. Conversely, a significant number of these changes resulted in customer confusion. As a result, we’ve seen the emergence of a general downward trend in customer satisfaction, even while recording increases in profits and return to shareholders. Clearly, these conflicting trends cannot co-exist in the long term. And just as clearly we have recognised the need to do something about it. The customer agenda – a renaissance. The momentum has started to build and our goals are already a matter of public record: > We are committed to doubling customer advocacy in the next three years. That is, we will have twice as many customers who are not just satisfied and loyal – but who actively recommend ANZ to their friends and associates. > We have set a target of gaining 1 million new customers by 2005. > We aim to provide for 50% of all our customers’ financial needs (up from the current 40%) by 2005. Achieving the goals of the new agenda will see a fundamental shift in power from head office and support areas to the branches. It also means the creation of a new kind of branch with new motivations, new mindsets and new approaches. We have every confidence that this will deliver: > a more welcoming and team-oriented approach to customers. > a new path of success for all ANZ branches in the near future. Award-winning products now. While recognising we have a long road to travel before reaching our goals, we’ve already established some major milestones on the journey. This past year, for example, we have won several major banking awards: > Australian Savings Institution of the Year (Personal Investor Magazine). > Home Lender of the Year – 3 years running (Personal Investor Magazine). > On-Line Bank of the Year (Personal Investor Magazine). > Best Frequent Traveller Credit or Charge Card – International (Inside Flyer Magazine 2001). Other awards include Silver Medals: > Small Business Acceptance Facility of the Year (Personal Investor Magazine). > Margin Loan of the Year (1 Year Fixed) for the fourth consecutive year (Personal Investor Magazine). A word about – and a message for – our branch staff. There is no denying the changes of the past few years have sometimes been both painful and frustrating for our branch staff. For them, as it has been for everyone in the organisation, it has been a trying time and each ANZ staff member should be recognised and congratulated for their hard work, loyalty and professionalism during this period. This report’s message for them is that plans for a new era of pride, involvement and teamwork have already begun. Our goal is that each individual will have not just a job but an exciting place to work and a motivating mission to fulfil. This vision sees our branch staff being able to exceed customer expectations – and their own. We want to create an environment where our staff will be enabled as never before. And now, more than ever, our branch staff are vital to the future of ANZ. 12 13 Overall Staff Satisfaction Personal Financial Services % 100 80 60 40 20 0 PFS MOR MET REG CAR WM SMB 1999 2000 2001 PFS - Personal Financial Services MOR - Mortgages MET - Metrobanking REG - Regionalbanking CAR - Cards and ePayments WM - Wealth Management SMB - Small to Medium Business Overall Customer Satisfaction with Bank (Individuals) Personal Financial Services Score out of 10 7 6.8 6.6 6.4 6.2 6 0 ANZ CBA NAB WBC Source: Roberts Research “A new path of success for all ANZ branches.” Peter Hawkins Group Managing Director Personal Financial Services ANZ Annual Report 2001 Personal Financial Services Greg Camm Managing Director Mortgages Elizabeth Proust Managing Director Metrobanking Alison Watkins Managing Director Regionalbanking 01 Mortgages 02 Metrobanking We have continued to provide our customers with the best mortgage products and services available and we are progressing the on-going development of Australia and New Zealand’s leading mortgage business. 2000–2001 Achievements > Named Personal Investor Magazine Home Lender of the Year for the third year in a row. > Achieved strong share of new mortgage originations in Australia. We are energising the new customer agenda while revitalising the metropolitan branch network with new staff motivation and enhanced capabilities. 2000–2001 Achievements > Creation of a dedicated Metrobanking business unit, effective from 1 March 2001 to focus specifically on serving the needs of metropolitan based personal customers. > Won numerous banking industry awards including: – Australian Savings Institution of the Year > Completed implementation of unified technology (Personal Investor Magazine). platform across the business. > Issued US$1 billion in mortgage-backed securities into the global markets – our first international issue. > Maintained our sound risk profile. Future Objectives > Maintenance of our product and distribution leadership. > Enhanced automation and web-based delivery of services. > Development of additional third party alliances. > Strengthen our customer ethic to “best in class”. – On-line Bank of the Year (Personal Investor Magazine). – Best investment/financial site (Financial Review Australian Internet Awards 2000). – Best Internet Bank in Australia and New Zealand (Global Finance Magazine). Future Objectives > Upgrade and optimise the locations of our branches. > Significantly improve both customer and staff satisfaction and advocacy. > Implement a new sales and service technology platform for front-line staff. > Increase staff involvement in their local communities. 03 Regionalbanking This newly created, regionally dedicated business is reassessing and revitalising our role in serving the needs of regional customers, and establishing ANZ as the standout regional bank in Australia and New Zealand. 2000–2001 Achievements > The creation of a dedicated Regionalbanking business unit, effective from 1 April 2001 to focus specifically on meeting the needs of regional and rural personal and small to medium business customers. > Completed a comprehensive review of our regional and rural business leading to: – Clearer understanding of where potential lies. – Development of a distinctive strategy for achieving our goal of becoming the standout regional bank. Future Objectives > Make the most of our strong branch network in our local communities. > Serve our rural customers better. > Support our people and drive revenue growth through the “Regional Reach” program. – Process changes to give staff more time to focus on customers. – Local market planning tools and disciplines to focus our activities. – Conduct training and “breakout” development progams to build staff confidence and capabilities. 14 15 Mortgages Overall Customer Satisfaction with Mortgage Score out of 10 8.5 8 7.5 7 6.5 6 0 ANZ CBA NAB WBC Metrobanking Overall Customer Satisfaction with Bank (Individuals) Score out of 10 7 6.8 6.6 6.4 6.2 6 0 ANZ CBA NAB WBC Regionalbanking Overall Customer Satisfaction with Bank (Individuals) Score out of 10 8.5 8 7.5 7 6.5 6 0 ANZ CBA NAB WBC Source: Roberts Research ANZ Annual Report 2001 Personal Financial Services 16 17 05 Small to Medium Business 06 Cards and ePayments The Small Business team aims to strengthen our ties with small and medium sized businesses. Our goal is to revitalise our business with SME’s and realise the full growth potential it holds for ANZ. We are building the leading Cards business in Australasia by focussing on product innovation and providing a distinctive and superior customer experience. 2000–2001 Achievements > Created a dedicated business unit effective from 1 October 2000 focussed on providing relevant products and services to small and medium enterprise customers. > Review of all facets of the business and strategy, leading to the development of a distinctive new service proposition. > A substantial lift in staff satisfaction that will underpin improved service levels for customers in the year ahead. > Simplification of previously over-engineered credit processes. Future Objectives > Invest $10m to support growth in customer numbers and improved service. > Launch ANZ Impact* and runningmybusiness.com** to enhance our customers’ experience. > Increase geographic coverage and establish industry sector specialists. > Lift staff and customer satisfaction to 80% by 2004. * ANZ Impact is a cash flow modelling and scenario testing tool that will be offered to customers free on anz.com to help them better understand cash impacts of changes in their business. **runningmybusiness is a new Small to Medium Business “portal” which will be on anz.com and offers a range of services other than banking that customers may look to access. 2000–2001 Achievements > Increased market share of credit card balances outstanding, credit card spend, and merchant transaction volumes. > Announced the rollout of chip-based cards, along with our new chip-capable MultiPOS merchant terminals, which lead the market in functionality, speed and price. > Launched a new platinum credit card, known as PT100 into the Hong Kong market. > Won recognition as the “Best Frequent Traveller Credit or Charge Card – International” (Inside Flyer Magazine 2001). > Launched several important customer experience improvements, including the ability to get instant decisions in many cases for applications over the phone and on the Internet. > Contained fraud losses from credit cards at around half the industry average. > Improved staff satisfaction, building on the strong progress made in the past two years. Future Objectives > Continue to build a leading market position through product innovation and a high quality customer experience. > Leverage our distinctive capabilities into new growth areas, such as chip cards, and new markets such as Hong Kong. > Roll-out a state of the art technology and operations platform. > Continue to drive cultural change to support improvements for both staff and customers. 04 Wealth Management Wealth Management delivers comprehensive financial advisory services, covering investment, risk lending and gearing. In addition, under the ANZ Private Bank sub-brand, Wealth Management provides “high touch” personalised banking services and access to a range of third party specialists through alliances. 2000–2001 Achievements > Creation of a dedicated Wealth Management business unit which brings together Premier Financial Services, Financial Planning, ANZ Private Bank, Margin Lending and E*Trade (Online share trading). > Development of a unique customer proposition which: – is personalised but scaleable, – addresses customers’ total financial needs and, – minimises conflict by providing access to the best solutions available in the market. > Restructuring of staff around the customer into multi-disciplinary professional practices. Future Objectives > Deliver a unique customer offer and experience. > Increase adviser numbers. > Improve infrastructure and adviser support. > Leverage product and service opportunities. > Achieve 25% annual growth in net profit after tax over the next three years. Wealth Management Overall Customer Satisfaction with Bank Score out of 10 8.5 8 7.5 7 6.5 6 0 ANZ CBA NAB WBC Small to Medium Business Overall Customer Satisfaction with Bank Score out of 10 7 6.8 6.6 6.4 6.2 6 0 ANZ CBA NAB WBC Cards and ePayments Overall Customer Satisfaction with Credit Card Score out of 10 8.5 8 7.5 7 6.5 6 0 ANZ CBA NAB WBC Source: Roberts Research Craig Coleman Managing Director Wealth Management Satyendra Chelvendra Head of Restoring Customer Faith Program Graham Hodges Managing Director Small to Medium Business Brian Hartzer Managing Director Cards and ePayments ANZ Annual Report 2001 Personal Financial Services 18 19 Anne Green from the 55 Collins Street branch in Melbourne discusses some financial opportunities with Rebecca King. ANZ Annual Report 2001 Personal Financial Services 20 21 “Being Home Lender of the Year made the decision to go with ANZ an easy one for me.” ANZ Annual Report 2001 Corporate Financial Services 22 23 Dynamic, leading and growing. Partnering corporations for success. ANZ is the leading Australian bank for both the large and medium-sized corporate segments. Our customers enjoy the benefits of a product offering that is both priced competitively and offers a wide range of choice. Our service is a balanced blend of talented professionals, state of the art technology (we are leaders in web-enabled offerings) and knowledgeable, timely consultation. Our future growth will come from continued relationship excellence and providing increasingly value-added solutions for our global client base. Our targets for that growth are challenging ones – including doubling the size of our business and achieving a profit after tax of $1 billion by 2004 – all within a strategy that carefully manages and mitigates risk. While much of our business is based on long- standing relationships in our home markets of Australia and New Zealand, we also leverage our global “footprint” to attract customers who are looking to take advantage of our presence in the US, UK, and throughout Asia and the Pacific. This strong combination of Australasian strength and global perspective provide us with unique growth opportunities. While Corporate Financial Services is one of the least public of all the faces of ANZ, we are nevertheless a relationship oriented business based on outstanding people. Our resources and expertise assist our customers to employ thousands of people and – in the process – contribute to the financial well being of many shareholders. Moreover, the products we offer and the funding we provide supports every facet of our economy – from international trade and business financing to infrastructure projects such as power stations, freeways, and communication networks. Overall Staff Satisfaction Corporate Financial Services % 100 80 60 40 20 0 CFS 1999 C&I ANZIB* GTS 2000 2001 * Includes GSF, GCM, GFX - Corporate Financial Services - Corporate And Institutional Banking CFS C&I ANZIB - ANZ Investment Bank GTS GSF GCM GFX - Global Transaction Services - Global Structured Finance - Global Capital Markets - Global Foreign Exchange “Our Australian strength and global perspective provide us with unique growth opportunities.” Roger Davis Group Managing Director Corporate Financial Services Grahame Miller Managing Director ANZ Investment Bank ANZ Annual Report 2001 Corporate Financial Services 24 25 Customer Satisfaction with Relationship Manager (Corporate Banking) Score out of 10 8.5 8 7.5 7 6.5 6 95 96 97 98 99 00 01 ANZ CBA NAB WBC Source: Roberts Research Bob Edgar Managing Director Corporate and Institutional Banking Peter Hodgson Head of Investment Banking Services Australasia Chris Cooper Global Head of Foreign Exchange 01 Corporate Banking 02 Institutional Banking We have long-established relationships with our middle market corporate customer base. The experience and expertise of our people, coupled with their affinity with our customers’ business, enables us to tailor products and services uniquely suited to our clients’ needs. We have banking relationships with major Australian and international corporations. As such this business leverages the knowledge and experience we have gained through long- established relationships to provide maximum value to our institutional customer base. 2000–2001 Achievements > Maintained our leading market position in customer satisfaction (Source: Roberts Research). > Increased profitability by 12%. > Launched our Corporate Banking internet portal. Future Objectives > Deliver the ‘Wall Street to Main Street’ program – the provision of investment banking style products to the middle market. > Increase the product cross-sell from our Personal businesses into the Corporate customer base (Cards, Superannuation, Insurance, Mortgages). > Leverage the Corporate portal to lower costs and enrich the customer experience. > Maintain performing loans at 99% of total book. 2000–2001 Achievements > Received the leading industry ratings in overall customer satisfaction, quality of relationship management, innovation and industry knowledge. > Capitalised on our industry expertise to generate a 26% increase in revenue and 38% increase in profitability. > Achieved a substantial increase in revenue from the provision of investment banking style solutions for our customers. Future Objectives > Continue to build on industry specialisation. > Maintain #1 customer satisfaction ratings. > Maintain focus on customer profitability, cross- selling, and the effective use of balance sheet. > Use the Corporate portal to lower cost, improve service and enrich the customer experience. > Maintain performing loans at 99% of total book. 03 Global Foreign Exchange ANZ is the pre-eminent Australian Foreign Exchange bank. 2000–2001 Achievements > Performed strongly in a competitive industry with year on year profit up 26%. > Named Foreign Exchange Bank of the Year (Asia Money 2001). > Rated Australia’s Best Foreign Exchange Bank (FX Week). > Conducted 25% of all corporate deals online with transaction values in excess of $4billion. Future Objectives > Capitalise on our core capabilities with a differentiated product and service proposition for customers. > Focus on foreign exchange solutions for investors. > Improve ANZ foreign exchange services for small business segment. > Focus on delivering commoditised FX product to our worldwide customer base. > Deliver double digit earnings growth with low volatility. ANZ Annual Report 2001 Corporate Financial Services 26 27 04 Global Structured Finance This business is tasked with leveraging our global structured finance capabilities in chosen specialist markets both domestically and overseas. 2000–2001 Achievements > Increased focus on structured, higher-margin product solutions. > Reduced balance sheet intensity. > No 1 Project Finance Loan Arranger, Asia Pacific, (Dealogic Capital Data Project Ware). > No 1 Project Finance Loan Arranger, Asia, (Dealogic Capital Data Project Ware). Future Objectives > Continue to build industry and product specialisation. > Increase geographic diversity. > Become the pre-eminent global structured finance house in the sectors and geographies in which we have chosen to compete. > Continue to exploit the intellectual capital of the business to leverage our specialist advantage. > Double digit earnings growth, with a cost income ratio in the 40% range. 05 Global Transaction Services 06 Global Capital Markets This growth business comprises a portfolio of product lines that assist corporate and institutional customers with working capital management, liquidity management and transaction processing. This business is responsible for the delivery of capital markets, securitisation, fixed income and interest rate product services to our corporate, institutional and funds management clients. 2000–2001 Achievements > Launched Proponix, a global trade processing joint venture. > Recorded strong earnings growth with revenue up 2000–2001 Achievements > Recorded 22% increase in revenue and 59% profit growth while adopting a low risk profile. > Ranked Number One – Interest Rate products by 11% and profit up by 29%. in Australia 2001 (Asia Risk). > Maintained our position as the leading trade processing bank in Australia. Future Objectives > Insource and wholesale relevant parts of core capabilities. > Further e-enable the business to improve productivity and service. > Double earnings by 2005, with a cost income ratio comfortably in the 40% range. > Rated Number One in Commercial Paper Australia & New Zealand (Asia Money). > Named Lead Arranger Debt Issuer of the Year (Insto). Future Objectives > e-enable, sell or exit those businesses subject to commoditisation and scale economics. > Grow our core business at 10%–15% compound, consolidating our top three status. > Focus on select, high growth, high intellectual property businesses, in which we have already built a strong pipeline such as securitisation. > Establish global leadership in Australian and NZ credit and derivative products. Gordon Branston Country Head UK/Europe & Executive Director Global Structured Finance Carole Anderson Managing Director Global Transaction Services David Hornery Global Head of Capital Markets ANZ Annual Report 2001 28 29 “We opened for business in 1917. ANZ’s support means we’ve never had to look elsewhere.” Hugh Bayford Bayford’s Ford Dealership. Esanda customer. Frank Tate Managing Director of Evans & Tate Wines, a family customer since 1925 and undertook a successful Initial Public Offering with ANZ Investment Bank this year. Neville Millin ANZ Relationship Manager with customers Leon Ress, owner of the Mitre Tavern and a family customer for 70 years, and Roger Mason, Sirius Telecommunications. “At Sirius we look for sound and innovative financial solutions. ANZ has delivered for us.” Tupua Fred Wetzell Apia Concrete Products Ltd, a Wetzell family-owned company and valued customer of ANZ Samoa. ANZ Annual Report 2001 International and Subsidiaries 30 31 “ We are not only providing a wide range of banking services in these countries, but also contributing to local development.” Elmer Funke Kupper Group Managing Director International & Subsidiaries Overall Staff Satisfaction International & Subsidiaries % 100 80 60 40 20 0 I&S A PAC ASF ANZI 1999 2000 2001 - Asia I&S - International & Subsidiaries A PAC - Pacific ASF - Asset Finance ANZI - ANZ Investments Asia China, Hong Kong, Indonesia, Japan, Korea, Malaysia, Philippines, Singapore, Taiwan, Thailand and Vietnam. Pacific American Samoa, Cook Islands, East Timor, Fiji, Papua New Guinea, Samoa, Solomon Islands, Tonga and Vanuatu. Ian Richards Head of Strategy Leveraging strengths for growth. Australia and New Zealand’s bank in Asia and the Pacific. International We are a corporate citizen – and a significant force not only in our countries of origin but throughout the Asia–Pacific region as well. Future Objectives > Grow the network business by leveraging core Group capabilities in Trade Finance, Foreign Exchange, Structured Finance and Personal Banking. Asia In Asia we specialise in serving the needs of a core group of “top end” corporate clients whose interests extend throughout the region. To that end, our strength in eleven different Asian markets, and across a number of leading product capabilities, not only makes us unique among Australian banks, but makes us an ideal partner for companies operating Asia-wide. In addition, we are growing our personal banking franchise in several of the Asian markets, with excellent progress being made in Vietnam and Indonesia. In Indonesia, where ANZ owns a 29% stake in Panin Bank, we will continue to help build the consumer franchise. The Asian region, with the possible exception of China, is experiencing a slowdown in immediate growth prospects. Coming out of the 1998 Asian economic crisis, ANZ has refocussed its strategy on its core strengths. As a result, our risk profile improved significantly, allowing us to better respond to changing conditions. 2000–2001 Achievements Asia maintained its performance momentum from the first half. This was achieved through: > Continued improvement in the quality of the loan portfolio with approximately 95% of relationships in the AAA to BB range. Other risks are essentially trade and product related in higher risk countries. > Selective expansion of our product capabilities in Trade Finance, Foreign Exchange and Structured Finance to a variety of customers. > Continue to re-balance resources to growth areas. > Maintain growth momentum in Panin Bank in Indonesia. The Pacific ANZ in the Pacific is already a strong force in commercial and retail banking. In many Pacific nations we hold a leading market position. Over the past few years, we have made modern banking products and services available throughout the South Pacific. An example of our investment in the Pacific is our electronic banking strategy. Over the past 12 months, electronic banking volumes in the Pacific grew by 60%. A highlight in 2001 was our entry into East Timor, where ANZ staff are building the infrastructure for banking from the ground up. As a result, we are providing a wide range of banking services, and we are also contributing to local development. ANZ in the Pacific aspires to build on its leadership position by continuing to improve our product range and customer service model, and by entering new markets. 2000–2001 Achievements > Increased our coverage and presence with new operations in East Timor, American Samoa and a 75% shareholding in the Bank of Kiribati. > Extended our electronic and telephone banking channels across most countries. > Re-engineered our business processes to fund growth initiatives. > Launched ANZ Pacific region website at anz.com/pacific and introduced internet banking in Fiji. ANZ Annual Report 2001 International and Subsidiaries 32 33 > Announced the acquisition of Bank of Hawaii’s operations in Fiji, Papua New Guinea and Vanuatu. We are expecting to complete these acquisitions by the end of 2001 and they will strengthen our already strong franchises in the Pacific. Building a platform for growth. Future Objectives > Continue expanding our presence in new and existing markets throughout the Pacific. > Develop our local staff and provide them with new opportunities. > Increase our electronic delivery channels to reach more customers. > Continue improving and refining our successful business operations/management model. Subsidiaries Leveraging strengths to build a platform for growth. Asset Finance Esanda and UDC, ANZ’s Asset Finance businesses in Australia and New Zealand, specialise in building relationships with customers through vehicle and equipment finance, vehicle fleet management and servicing, and debenture investments. They are predominantly ‘first choice’ providers in both vehicle and equipment finance, and are using this position to invest for growth. A new technology platform is being activated in the 2001 calendar year, a systematic cost-control program is well in place and promising new growth channels are being established. As a result, the business is positioning itself to provide premium products and services and deliver returns which reflect that quality. East Timor now has its own ANZ Branch. 2000–2001 Achievements > Made significant efficiency improvements in Esanda in Australia and UDC in New Zealand through an ongoing program of technology investment and process re-engineering. > Launched a Vendor Finance business via a strategic alliance. > Launched insurance products via a joint venture to offer bundled product solutions to our customers. > Improved the profitability and market position of our fleet businesses in Australia and New Zealand. > Continued to improve the returns from the business via improved margins. Future Objectives > Continue unit-cost improvements in the servicing and processing areas through e-transformation. > Utilise extensive customer base for the cross-selling of non-asset related products (such as insurance) to our customers. ANZ Investments One of the great strengths of our business lies in the size and stability of our customer base, both retail and corporate. With the establishment of our customer businesses in Personal Financial Services, we have created the focus that will allow us to capture this growth potential. At the same time, we recognise that funds management, as a product business, is an increasingly global one. Notwithstanding the good growth we have achieved in this business in the recent past, we believe that the best way to further accelerate the growth in this business is to join force with a major player in the funds management business. We expect to announce details soon. ANZ Investments aspires to be a leading manufacturer and supplier of funds management and insurance solutions in Australia and New Zealand. 2000–2001 Achievements > Recorded strong investment returns and good customer service. > Established a comprehensive new set of ANZ Investments products. > Launched the new ANZ Investments brand through the “Leave Work Early” campaign. > Substantially increased net sales of investment and insurance products leading to improved market share and profitability. Future Objectives > Develop new and distinctive product and service propositions to meet the special needs of ANZ’s customer businesses. > Extend the “Leave Work Early” campaign to cement ANZ Investments as a leading investment brand. > Continue to profitably grow net sales, funds under management and insurance premiums by leveraging off the Wealth Management customer business. > Finalise the joint venture with a major global fund manager. “Esanda and UDC are predominantly ‘first choice’ providers... and are using this position to invest for growth.” John Winders General Manager Asia Bob Lyon General Manager Pacific Peter McMahon Managing Director ANZ Asset Finance Bruce Bonyhady Managing Director ANZ Investments ANZ Annual Report 2001 New Zealand 34 35 Strong performance in a competitive market. ANZ provides the full range of financial services in New Zealand, with the Group’s portfolio of specialist businesses well represented in the New Zealand market. ANZ also owns New Zealand’s leading finance company (UDC) and leading EFTPOS provider (EFTPOS NZ). ANZ is the fourth largest bank in New Zealand with total assets of A$22b, and approximately 16% share of the New Zealand lending market. ANZ’s franchise in New Zealand is strong, represented by more than one million customers – the second largest of any NZ bank. In a very competitive market, ANZ has substantially increased its efficiency and profitability over the past three years, moving from one of the poorer performing banks to one of the best. 2000–2001 Achievements > ANZ in New Zealand contributed A$278m to the Group’s 2001 result, an increase of 15% on the previous year (pre-abnormals in 2000). Costs are now less than 50% of revenues, return on assets is 1.3%. > The New Zealand business is now well aligned and integrated within the Group, due to the following factors: – A shift in business mix in favour of personal financial services (now about 64% of revenues). – Increased contribution from fee income (now 33% of total income). – Costs have been held and credit quality improved (specific provision charge 0.24% of loans and advances). – Core transactions and customer and account technology have been moved onto a common trans-Tasman platform. – Each business unit operates on a fully integrated trans-Tasman basis. Murray Horn Managing Director ANZ New Zealand > The past two years have seen double digit On the personal side: – Further development of the ANZSat and Customer Charter initiatives introduced this year. – Improving our product range to better meet customer needs. – Introducing our new sales and service technology platform. – Strengthening our customer recognition program. > Invest in areas of higher growth, including cards and EFTPOS NZ, wealth and funds management, small business and corporate finance. > Further integrate trans-Tasman technology through the introduction of a Common Administration System; a common sales and service platform and a common international trade and payments processing platform. > Strengthen front-line customer focus and staff management by putting all line managers through an individualised leadership development program and increasing our focus on front-line training. increases in the level of staff satisfaction. ANZ’s overall staff satisfaction of 67% positive is now well above the SICORE all company average for financial institutions (59%). > Customer satisfaction on the corporate side of the business remains very strong. Our focus is now on improving personal customer satisfaction. This year we launched ANZSat, a program that surveys 6500 customers every six months, identifies business unit plans to address issues of customer concern and links the plans to individual rewards. We also launched the ANZ Personal Customer Charter promising fee refunds if minimum service standards are not met. > We continue to develop ANZ’s historically very strong position on the corporate side of the business, with greater focus on deposits and on non-lending fee income. The introduction of a small ANZ Private Equity business during the year has substantially increased our profile in the mid-corporate market and provided some strong growth opportunities. Our Investment Bank has also had a very strong year, completing some high profile transactions. Future Objectives > Maintain strong on-going financial performance with further improvements in efficiency and profitability. > Grow the business by strengthening and deepening relationships with both our corporate and personal customers. On the corporate side, we continue building capability to deliver our “Wall Street to Main Street” customer strategy. New Zealand Overall Staff Satisfaction % 100 80 60 40 20 0 1999 2000 2001 ANZ Annual Report 2001 Risk Management 36 37 Minimising surprises. Maximising preparedness. ANZ’s Risk Management Vision Risk management at ANZ is directed to achieve strong risk control and a distinctive risk management capability, which enables ANZ business units to meet their performance, growth and “breakout” objectives. The identification and effective management of risk is an essential part of banking. Overall, our risk capabilities are considered to be a strategic asset and a source of competitive advantage. Through effective use of technology and strong management focus, we seek to further strengthen the Group’s risk capabilities and culture to ensure that ANZ remains at the forefront of risk management capability within financial services. Strategic Context The overall strategy of an organisation fundamentally impacts the level of risk that it takes. Therefore, some of the most important decisions influencing the underlying risk of an organisation are those which determine the activities, businesses and regions in which the organisation engages. The major elements of risk management policies are approved by the Board of Directors, with the Board Risk Management Committee supervising implementation and adherence to policy. In recent years, ANZ has made substantial changes to its strategy and activities in order to reduce risk and enhance the sustainability of earnings growth. Mark Lawrence Group General Manager Risk Management Mick Green Head of Retail Risk Management 2 Market Risk Risk to earnings arising from movements in interest and exchange rates and bond, equity and commodity prices. > The Group Asset and Liability Committee oversees the Group’s balance sheet risk – trading risk is monitored by the Credit and Trading Risk Committee. Further oversight is provided by the Risk Management Committee. > There have been no significant structural changes to the Group’s market risk exposures over the past twelve months. Market risk continues to be managed within conservative bounds. 3 Operating Risk Operating risk arises from the potential breakdown of day-to-day processes. > ANZ has spent significant time and effort during the past two years developing advanced operational risk measurement and management capabilities, with the Group’s operational risk economic capital framework acknowledged as an example of leading practice globally. > The Operating Risk Executive Committee is responsible for development and oversight of operating risk policies. > A prime responsibility of Business Units is to ensure compliance with policies, regulations and laws. > Key focus areas over the past year have included fraud prevention, payments risk management and remote banking security. John Conn Head of Wholesale Risk Management Examples of these changes include: > Sale of Grindlays Bank. > Reducing the risk profile of the remaining international businesses. > Exiting emerging markets bond trading and retail stockbroking activities. > Restrictions on corporate balance sheet growth – focus on higher quality assets and fee income. > Strong growth in the residential mortgage portfolio. > Increased emphasis on lower risk Personal Financial Services businesses. These changes have been accompanied by significant enhancement of the Group’s internal risk management systems and processes and more open, transparent disclosure of risk. Three Key Areas of Risk: 1 Credit Risk The potential financial loss resulting from the failure of a counterparty to honour fully the terms of a loan or contract. > Policy controls aimed at developing and maintaining a well diversified credit portfolio are supervised by the Board’s Risk Management Committee. During the year, the Group’s peak exposure limits to all categories of corporate customers were reduced to support this objective. > Major lending decisions require sign-off from an independent credit risk function as well as the business unit. The largest transactions require approval by the Credit and Trading Risk Committee of management and/or the Risk Management Committee. > The Group has continued to rebalance its lending portfolio towards lower risk consumer lending, particularly mortgages. This trend has been supported by the introduction of advanced behavioural and other credit scoring technology in Personal Financial Services. 38 39 Future Objectives > Continue the development of Customer Relationship Management (CRM) capability, to provide a single view of the customer. > Continue to develop advanced external web security capabilities including authentication certificates, firewalls, triple DES encryption and smart chip technology for EFTPOS and secure Internet shopping. > Continue to drive next wave efficiencies via component re-use and standardisation of technologies. > Continue to implement Common Administration Systems (PeopleSoft) with self-service and “straight-through” processing. > Rollout of new service model for all server and desktop environments which enables a standard operating environment and lowers the total cost of ownership. > Continue deployment of standard Microsoft Windows 2000 based computing platform across the group for new applications. > Enhance the single IP network to support rich media content and multi-media applications. > Continue consolidation of ANZ call centres with the development of a new purpose-built facility. > Continuously upgrade data centre capability to match growing demand for 24 hour, 7 day a week service availability. > Developed enhanced project execution and reporting capability, including project management tools. > Attained Capability Maturity Model level 2 certification from the Software Engineering Institute (USA), a first for an Australian bank. The program has delivered significant productivity and quality improvements. > Delivered further procurement cost savings, including an additional $4 million savings on telecommunications costs. > Introduced new online global payments technology, providing greater efficiencies and real time capabilities. > Substantially replaced existing proof of deposit equipment with a world class voucher image processing system that uses a “one pass” proof process. Staff Satisfaction Technology, eTransformation & Shared Services % 100 80 60 40 20 0 1999 2000 2001 ANZ Annual Report 2001 ANZ and Technology “Breaking down the barriers and enhancing the ‘e’ experience.” ‘Information Technology’ or ‘IT’ can have a different meaning for different people. To some it’s merely a necessary business tool. To others, it represents a new way to access information and communicate with the world. But to those unfamiliar with its benefits, IT can provoke anxiety or fear, and may be seen as a barrier between people and business. At ANZ, we are breaking down these barriers by embracing technology in partnership with the business. By harnessing technological advancements, we believe we can provide our customers with superior services and greater accessibility. We are also committed to eTransforming our internal processes and streamlining our business by adapting smarter and faster technology-based practices. With these goals in mind we are putting technology to work to: > Provide our customers with a personalised, consistent experience. > Empower our customers and our people with real-time information access and online applications available via web technology anywhere and anytime. > Ensure our technology infrastructure is robust, flexible and cost effective. > Aggressively reduce costs, improving productivity, increasing “straight-through” processing, simplifying and automating administrative functions. > Provide low risk, high efficiency and state-of-the-art payment capabilities. Technology, eTransformation and Shared Services > This ANZ business unit (known as ‘TeSS’) is ANZ’s core support division. It is responsible for ANZ’s global technical platforms, development and maintenance of business applications, the Group’s payments business and provision of shared services including property, procurement, Human Resources services and outsourcing. TeSS is also responsible for ANZ’s eTransformation program to leverage the value of technology in creating better ways to work and serve our customers. 2000–2001 Achievements > Commenced rollout of new hardware and Microsoft Windows 2000 operating system for the branch network in Australia and New Zealand – in readiness for the rollout of the new sales software application. > Delivered over 20 new online straight- through applications providing reduced costs and turnaround times and improving information accuracy. > Max (ANZ’s Intranet) awarded “Best communication and information service in a large organisation” by the Australian Telecommunications Users’ Group. > Restructured the technology organisation to deliver high quality solutions more rapidly and efficiently. Jeff Pitt Head of Payments Richard Tait Head of Customer Technologies David Boyles Group Managing Director Technology and Services ANZ is 2001 Internet bank of the year. Recognising that our people are the key to our success. For Peter Savelli, Kristine McCann, Anneli Blundell, Rosa Lucarelli, Daniel Ota, Jenny Hui Tong, Michelle Leung, Suzie Pletvarec, Dee Bertram, Danny Dinicolo and 22,000 more, ANZ is a place to grow. ANZ Annual Report 2001 Our People 42 43 Whether serving customers over the branch counter, advising on the best way to structure a home loan, giving assistance over the phone, keeping our own internal systems running smoothly, financing the infrastructure of developing countries or looking after any one of thousands of essential tasks, our people – all 22,501 of them – are central to our success. Our aspiration is to create an employment brand that not only reflects the needs and desires of our people, but also encourages them to actively recommend ANZ to friends and associates as the best financial institution to do business with and the best employer (in any sector). The recognition that our people are key to driving our success is reflected in more than 1,000 employees recently participating in three-day “Breakout” workshops, as part of our cultural transformation program. As the name implies, these workshops are designed to encourage our people to “breakout” from previously accepted ways of thinking and doing things and to be bold and have the courage to be different. The resulting changes in mindset and behaviour will enable us to serve our customers and ourselves better and more proactively – and further develop a world- class performance culture which delivers value for our shareholders. To provide greater incentives, we are sharpening our commitment to performance-based rewards by “breaking out” from traditional annual reviews and rewards and moving to a half-yearly performance, bonus and options cycle. Also, permanent staff have received $1000 of shares in each year since 1999. We recognise that e-enabling our organisation does not just extend to our customers and shareholders, but to our people as well. In this area, we are continuing our leadership in online learning through our recognised eLearning platform, ANZ eTrain. More than 450 courses, ranging from compliance training to a full online MBA, are now available to ANZ staff online. To date, 18,200 staff in Australia and New Zealand have used ANZ eTrain, and 24,900 online courses have been completed. As a result we have realised significant benefits in the cost effectiveness, quality, responsiveness and distribution of training. The popular pcs@home offer has been rolled out again. This program allows staff in Australia and New Zealand to apply for a heavily subsidised PC, complete with Internet access. The package helps staff and families become more familiar with PC and Internet technology, and underlines the importance ANZ places on eTransformation. And as part of our approach to refreshing the ANZ workforce we have again this year been one of Australia and New Zealand’s leading employers of university graduates with approximately 200 graduates in the 2002 intake. Overall Staff Satisfaction ANZ % 100 80 60 40 20 0 1999 2000 2001 Staff believe Management will act on Issues identified in this Survey % 100 80 60 40 20 0 1999 2000 2001 Finally, we recognise the need for our people to have a healthy balance of work and life away from work. Putting this recognition into practice not only fosters a happier and more productive workplace, but also helps ANZ attract and retain the best talent as an employer of choice. To this end, ANZ has a range of family-friendly policies covering areas such as parental leave, family leave, job sharing and telecommuting. Our progressive stance on work-life balance has been recognised through ANZ being named a finalist in two categories in the Australian Chamber of Commerce and Industry National Work and Family Awards. All these changes, and the strengthening company performance means that our ability to attract the best people to ANZ has never been better. Attracting the best people enables us to create a financial services experience that meets the needs of our customers, shareholders, and communities, and it makes ANZ a great place to work. “We want our staff to be bold and have the courage to be different.” Shane Freeman Head Of People Capital Sonia Stojanovic Head of Breakout and Cultural Transformation ANZ Annual Report 2001 The Community and the Environment ANZ staff in Melbourne took part in a walkathon to raise money for the Royal Children’s Hospital and the Anti–Cancer Council 44 45 Fulfilling our Community Responsibilities. At ANZ we are very clear about our responsibilities to our customers and shareholders, and to the communities in which we operate. We earn our living from these communities and we should do what we can to put something back. Our helping hand extends beyond the funding of projects and initiatives: we work closely with partnered organisations to help ensure their success, by providing professional, technical and volunteer support. We are also placing an increasing emphasis in our community relations programs, on issues most relevant to financial services. 50,000 Hours ANZ is proudly supporting the communities in which we operate through the 50,000 Hours program. The program provides up to one full day of paid leave for each staff member and up to 12 months continuous leave without pay for volunteer service in the community. Many ANZ employees already devote significant personal time to not-for-profit organisations, including Youth at Risk and Foodbank Australia. ANZ wants to recognise these employees and it also wants to encourage a widespread commitment to the community throughout the organisation. This move is part of an effort by ANZ to develop and foster a culture of good corporate citizenship that values the community and acknowledges staff already volunteering in the community. ANZ’s long term aim is to provide 50,000 hours per annum of volunteer work to local communities. Youth at Risk Recognising the need to encourage the development of our youth, ANZ is now one of the major sponsors of Youth at Risk. Youth at Risk is a community based organisation that develops and delivers programs for disadvantaged youth. Most program participants come from difficult backgrounds and have had experiences with crime, suicide, drug abuse and prostitution. This relationship began in 1998 and ANZ’s involvement has evolved beyond a financial contribution. Staff regularly participate in the key program, Interviewing Your Future, which aims to prepare youth for future employment and aid in personal development. Through the 50,000 Hours program ANZ staff conduct interview technique sessions and, in the months following the seminar, mentor the program’s participants. Youth at Risk has had great success and ANZ’s support has allowed the program to be extended from metropolitan Victoria to rural and regional Victoria, as well as into NSW. Plans are also underway to move to other centres around the country. Credit Helpline Credit Helpline is a non-profit company that provides free, independent advice to Victorian consumers with credit or debt problems. Credit Helpline was established in 1994 and relies on funding from several sources, including ANZ. ANZ’s support for Credit Helpline is not only financial – staff volunteers are involved in setting up new networks, an email system and a new website. Through this affiliation with Credit Helpline, ANZ underscores its commitment to assist individuals with their financial needs, and to support the development of the communities in which ANZ operates. Foodbank ANZ has committed $1m to support Foodbank nationally for 5 years. ANZ gives Foodbank the opportunity to help welfare agencies around Australia meet the most basic need of people – food. The partnership with Foodbank gives ANZ staff the opportunity to volunteer to assist Foodbank in its work. 2000–2001 Achievements > Joining the Australian Greenhouse Office’s Greenhouse Challenge. > Joining the Victorian Government’s Wastewise program. > Joining the Sustainable Energy Authority of Victoria as an Energy Smart Partner. > Liaising with City West Water to assess ways of reducing our water consumption. > The start of a trial of best practice waste diversion strategies in 100 Queen Street, with the intention that these will be replicated across all sites over the next two years. > Undertaking a green building rating of 100 Queen Street. > Participation in the Property Council of Australia’s Energy Smart Leader’s Program. > Having been assessed as being in the top 10% of the leading sustainability organisations in the banking sector globally, ANZ shares will form a component part of the Dow Jones Sustainability World Index from October 2001. Political Donations In Australia in the year to September 2001, ANZ donated $75,000 to the Liberal Party, $50,000 to the Labor Party and $10,000 to the National Party. Wet ‘n’ Wise Wet ‘n’ Wise is a community partnership between Royal Lifesaving Society Australia and ANZ. The aim of the program is to reduce the number of water-related deaths that occur each year. Using an interactive resource kit and website, Wet ‘n’ Wise focusses on encouraging schools to teach children the rules of common sense and safety in and around water. Launched in November 2000, the Wet ‘n’ Wise program is being utilised by swimming centres, local councils, schools and education departments throughout Australia. Intensive Care Appeal The Intensive Care Appeal aims to increase the survival rate of intensive care patients. Its financial goal is to raise $10m over three years. It is estimated these funds could help save an additional 2,000 lives a year. ANZ is a major partner in this endeavour and has already contributed $750,000 to the appeal. ANZ and the Environment ANZ realises that it cannot separate its financial operations from the environmental impact and has appreciated the need to incorporate environmental considerations into its decision-making process. To this end, the group appointed an Environmental Initiatives Manager during the year, who was given the role of assessing ways that ANZ could reduce its overall environmental impact. The Environmental Initiatives Manager meets regularly with a group of senior management representatives, to formulate the best way forward for ANZ. These are early days for us and ANZ is still assessing the best way it can address the issue of sustainability. However we feel that each of the initiatives undertaken so far will help keep the Bank firmly on the right path. ANZ Annual Report 2001 Board of Directors 46 47 Board of Directors. Mr C B Goode AC Mr J McFarlane OBE Dr B W Scott AO Mr J K Ellis B Com (Hons) (Melb), MBA (Columbia University, New York) Hon LLD (Melb) Chairman. Company Director. Director since July 1991, appointed Chairman August 1995. Chairman of Woodside Petroleum Ltd, Australian United Investment Co. Ltd, Diversified United Investment Ltd, The Ian Potter Foundation, and the Howard Florey Institute of Experimental Physiology and Medicine. Director of Singapore Airlines Ltd. Lives in Melbourne. Age 63 MA, MBA Managing Director and Chief Executive Officer. Appointed Managing Director and Chief Executive Officer in October 1997. Director of Australian Graduate School of Management and The Financial Markets Foundation for Children. Former Group Executive Director, Standard Chartered plc (1993–1997), Head of Citibank, United Kingdom (1990–1993), Managing Director, Citicorp Investment Bank Ltd (1987–1990), Director London Stock Exchange (1989–1991). B Ec, MBA, DBA Company Director. Director since August 1985. Chairman of Management Frontiers Pty Ltd, and The Foundation for Development Co-operation Ltd. Director of Air Liquide Australia Ltd and the James N. Kirby Foundation Ltd. Australian member of the Board of Governors of the Asian Institute of Management. Former Chairman of the Australian Government’s Trade Development Council (1984–1990), and Federal President, Institute of Directors in Australia (1982–1986). Lives in Melbourne. Age 54 Lives in Sydney. Age 66 MA (Oxon), FAICD, Hon FIE Aust, FAusIMM, FTSE Company Director. Director since October 1995. Chairman of Sandvik Australia Pty Ltd, Australia–Japan Foundation, Australian Minerals & Energy Environment Foundation and Black Range Minerals Limited. Director of Aurora Gold Limited, GroPep Limited and Pacifica Group Limited. Chancellor of Monash University, and a Council Member of the Victorian College of the Arts. Former Chairman, BHP Limited, International Copper Association Ltd, and Board Member of the Museum of Contemporary Art. Lives in Melbourne. Age 64 Ms M A Jackson B Econ, MBA, FCA Dr R S Deane Mr J C Dahlsen PhD, B Com (Hons), FCA, FCIS, FNZIM LLB, MBA (Melb) Company Director. Company Director. Director since March 1994. Chairman of Qantas Airways Limited, Chairperson of Methodist Ladies’ College and Deputy Chairman of People Telecom Ltd. Director of The Brain Research Institute and Billabong International Ltd. Board Member of the Howard Florey Institute of Experimental Physiology and Medicine. Lives in Melbourne. Age 48 Director since September 1994. Chairman of Telecom New Zealand Limited, Fletcher Building Limited and Te Papa Tongarewa (Museum of New Zealand). He has a number of directorships including TransAlta Corporation (Canada) and Woolworths Limited. Former Chief Executive and Managing Director, Telecom New Zealand Limited, Chief Executive, Electricity Corporation of New Zealand Ltd, Chairman of Fletcher Challenge Limited, State Services Commission, Alternate Executive Director, International Monetary Fund and Deputy Governor, Reserve Bank of New Zealand. Lives in Wellington. Age 60 Solicitor and Company Director. Director since May 1985. Consultant to and former Partner of the legal firm Corrs Chambers Westgarth. Director of Southern Cross Broadcasting (Australia) Ltd, Mining Project Investors Pty Ltd, The Smith Family and J. C. Dahlsen Pty Ltd Group. Former Chairman of Woolworths Ltd, Melbourne Business School Ltd, The Herald and Weekly Times Ltd and Deputy Chairman Myer Emporium Ltd. Lives in Melbourne. Age 66 Mr G K Toomey B Com, FCPA, FCA, FCIS Company Director. Director since March 1998. Former President and Chief Executive Officer of Air New Zealand Group (January 2001 to October 2001), Deputy Chief Executive Officer and Executive Director of Qantas Airways Limited (December 1993 to September 2000), Non-Executive Director of Air Pacific Limited (May 1998 to September 2000). Lives in Auckland. Age 46 Resigned October 2001 48 49 Concise Financial Report. The 2001 Concise Financial Report has been derived from the Group’s 2001 Financial Report. This Concise Financial Report cannot be expected to provide as full an understanding of the Group’s financial performance, financial position and financing and investing activities as the Group’s 2001 Financial Report. The Chief Financial Officer’s review on pages 8 to 11 provides a discussion and analysis of the concise financial statements. 2001 Financial Report A copy of the Group’s 2001 Financial Report, including the independent Auditors’ Report, is available to all shareholders, and will be sent to shareholders without charge upon request. The Financial Report can be requested by telephone (Australia: 1800 11 33 99, Overseas: (61 3) 9205 4892) and by internet at investor.relations@anz.com Contents 10 Year Summary Directors’ Report Directors’ Meetings Major Committees Directors’ Shareholdings Statement of Financial Performance Statement of Financial Position Statement of Cash Flows Notes to the Concise Financial Statements Directors’ Declaration Auditors’ Report Financial Highlights in Key Currencies Exchange Rates Shareholder Information 50 51 55 55 55 56 57 58 59 62 63 63 63 64 ANZ Annual Report 2001 Corporate Governance Accountability. Responsibility. Prudence. This corporate governance statement is a reflection of our respect for the responsibilities we hold and our firm intent to serve all those associated with ANZ in an honest and ethical manner. Board of Directors Role and responsibility The Board is responsible for: > charting the direction, strategies and financial objectives for the Group and monitoring the implementation of those policies, strategies and financial objectives; > ensuring regulatory requirements are observed and ethical standards are met; and > appointing, and reviewing performance of the Chief Executive Officer. The Board of Directors, working with the CEO and senior management, is responsible for the Group’s performance. Composition, independence and meetings The Board currently comprises the CEO and independent non-executive directors, who are neither a substantial supplier or customer, nor a past ANZ executive. The Company’s policy is for the Chairman to be an independent non-executive director and the Board comprise a majority of non-executive directors. Board size (five minimum) and composition are regularly reviewed. The performance of each non-executive director is reviewed by the Chairman. The Chairman’s performance is reviewed by the full Board. Details of the experience of directors are set out on pages 46–47. The Board meets at least 8 times a year. Board agendas ensure that each of the Board’s significant responsibilities (strategy, financial performance and risk), are addressed. In addition, directors hold regular meetings with senior staff to increase their knowledge of the business. Board nominations When a Board vacancy exists, candidates are identified with a mix of experience, skills, knowledge and perspective the Board considers necessary to enable it to carry out its responsibilities. The Board engages external consultants to assist in identifying candidates. Directors appointed to fill a vacancy stand for election at the Company’s next AGM. Share qualification Each director must hold at least 2,000 shares. Retirement policy One-third of directors stand for re-election by rotation at each AGM. Directors appointed after 1993 retire after 15 years of service. Independent advice and access to information Each director has the right, with the prior approval of the Chairman, to seek independent professional advice regarding their responsibilities, at the Company’s expense. Each director has the benefit of a deed that clarifies the circumstances in which he or she is entitled to obtain access to company documents and information. Committees There are three main Board committees, each with their own charter, which assist the Board to review audit, risk, and human resources. All committees meet regularly and are chaired by a non-executive director. Details of committee memberships and the primary responsibilities of those committees are set out on page 55. Policies and other matters Ethics The Company has developed a code of conduct which sets high standards for ethical behaviour and business practice, beyond complying with the law, in relation to: > ensuring confidentiality and privacy are respected; > acting with honesty and integrity at all times; > requiring personal transactions remain separate; > not accepting material personal benefits; and > avoiding conflicts of interest. The code also covers conflict of interest procedures. Continuous disclosure The Company has written policies and procedures for information disclosure that ensures it meets its obligations under the ASX continuous disclosure regime, including prior disclosure of material given to analysts. All material information disclosed to ASX is posted on the Group’s website. Share Trading The Company has a policy that prohibits directors and employees from acquiring, selling or otherwise trading in the Company’s shares if they possess material price-sensitive information which is not yet public. Remuneration The Group’s policy is to ensure that remuneration packages properly reflect the responsibilities of the senior executives and are adequate to attract, retain and motivate quality personnel. Details of the broad remuneration policy for directors and senior executives are set out on pages 52–53. ANZ Annual Report 2001 Ten Year Summary1 Directors’ Report 50 51 Statement of Financial Performance Net interest income Other operating income Operating expenses Profit before tax, debt provision and prior period abnormals Debt provision2 Income tax (expense) benefit Outside equity interests Profit (loss) after tax 2001 $m 2000 $m 1999 $m 1998 $m 1997 $m 1996 $m 1995 $m 1994 $m 1993 $m 1992 $m 3,833 2,612 (3,131) 3,801 2,583 (3,314) 3,655 2,377 (3,300) 3,547 2,142 (3,442) 3,437 2,110 (3,502) 3,327 1,839 (3,397) 3,084 1,754 (3,116) 2,794 1,793 (3,001) 2,539 1,730 (2,975) 2,427 1,990 (3,199) 3,314 (531) (911) (2) 3,070 (502) (863) (2) 2,732 (510) (736) (6) 2,247 (487) (576) (9) 2,045 (400) (466) (8) 1,769 (175) (469) (9) 1,722 (237) (442) (10) 1,586 (388) (388) (7) 1,294 (637) (190) (7) 1,218 (2,127) 336 (5) before prior period abnormals Net prior period abnormal profit (loss) 1,870 – 1,703 44 1,480 – 1,175 (69) 1,171 (147) 1,116 – 1,033 19 Profit (loss) after tax 1,870 1,747 1,480 1,106 1,024 1,116 1,052 803 19 822 460 (213) 247 (578) (1) (579) Statement of Financial Position Assets 185,493 172,467 152,801 153,215 138,241 127,604 112,587 103,874 103,045 101,138 Net Assets 10,551 9,807 9,429 8,391 6,993 6,336 5,747 5,504 5,133 4,591 Tier 1 capital ratio Return on average ordinary equity3,4 Return on average assets3 Cost income ratio5 Shareholder value – ordinary shares Total return to shareholders 7.9% 7.4% 7.5% 6.8% 20.2% 19.3% 17.6% 15.9% 17.2% 18.3% 17.9% 15.6% 0.8% 5.9% 4.8% 5.0% -11.4% 0.2% -0.6% 48.3% 51.7% 54.5% 60.9% 63.1% 65.8% 64.4% 65.4% 69.7% 72.4% 6.6% 6.7% 6.6% 7.2% 0.9% 0.9% 1.1% 1.1% 1.0% 0.7% 0.7% Market capitalisation Dividend Franked portion (share price movement plus dividends) 25.5% 35.3% 19.6% -15.6% 62.4% 33.9% 52.4% 8,199 33.0c 0% 33% $5.75 $3.55 $5.67 23,783 20,002 16,045 13,885 17,017 10,687 42.0c 52.0c 48.0c 60% 100% 50% 60% 100% 100% $7.28 $5.41 $7.23 $17.39 $13.46 $12.45 $11.88 $11.58 $8.45 $13.44 $7.10 $8.58 $9.60 $9.02 $11.28 $15.98 $13.28 $10.25 – interim – final – high – low – 30 Sep 73.0c 64.0c 100% 100% 100% 100% 56.0c 75% 80% Closing share price 2.0% 47.2% -19.6% 3,037 5,285 5,293 20.0c 25.0c 20.0c 0% 100% 0% 0% 0% 0% $4.88 $4.40 $5.68 $2.87 $2.53 $3.78 $2.88 $4.04 $3.91 Share information (per fully paid ordinary share) Earnings per share – basic Dividend payout ratio Net tangible assets No. of fully paid ordinary shares issued (millions) – interim DRP issue price – final 117.4c 106.8c 13.5c 68.6c 62.0% 59.1% 62.1% 67.8% 61.6% 55.5% 49.1% 46.4% 65.6% $3.43 $4.59 $5.96 $3.94 $5.49 $5.21 $4.98 $4.24 $3.58 69.9c 76.3c 55.9c 90.6c 72.6c -60.2c n/a $3.40 1,488.3 1,506.2 1,565.4 1,539.4 1,508.6 1,478.1 1,446.0 1,353.6 1,308.2 1,054.5 $3.58 $15.05 $11.62 $10.95 $10.64 $2.51 – $14.45 $11.50 $10.78 $3.42 $4.44 $3.78 $3.73 $4.40 $6.27 $5.59 $7.60 $9.77 $9.92 Other information Points of representation No. of employees (full time equivalents)6 No. of shareholders7 1 Data for 1998, 1999, 2000 and 2001 includes the consolidation of assets in the statutory funds of ANZ Life as required by an accounting standard applicable 22,501 23,134 30,171 32,072 36,830 39,721 39,240 39,642 40,277 43,977 181,035 179,244 214,151 151,564 132,450 121,847 114,829 121,070 115,000 112,036 1,205 1,056 1,087 1,147 1,473 1,744 1,881 2,026 2,136 2,302 from 1 October 1999 2 From 1997, the annual debt provision charge has been calculated based on economic loss provisioning; prior year data has not been restated for this change in measurement approach 3 After abnormals 4 From 2001, the return on average ordinary equity calculation accrues the dividend over the year; prior year data from 1997 has been restated for this change in calculation 5 Before goodwill amortisation and abnormals 6 Prior to 1997 excludes temporary staff 7 For 2000 and 2001 the number of shareholders does not include the number of employees whose shares are held by ANZEST Pty Ltd as the trustee for shares issued under the terms of any employee incentive plan The directors present their report together with the concise 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 2001 and the auditors’ report thereon. The information is provided in conformity with the Corporations Act 2001. Principal Activities The principal activities of the Group during the year were general banking, mortgage lending, life insurance, leasing, hire purchase and general finance, international and investment banking, investment and portfolio management and advisory services, nominee and custodian services and executor and trustee services. There has been no significant change in the nature of the principal activities of the Group during the financial year. At 30 September 2001, the Group had 1,056 points of representation. Result Consolidated net profit after income tax attributable to shareholders of the Company was $1,870 million. Further details are contained in the Chief Executive Officer’s Overview and the Chief Financial Officer’s Review commencing on pages 4 and 8 respectively of the 2001 Annual Report. Dividends The directors propose that a final fully franked dividend of 40 cents per fully paid ordinary share be declared on 19 November 2001 and be paid on 14 December 2001. The proposed payment amounts to $595 million. During the financial year, the following fully franked dividends were paid on fully paid ordinary shares: Cents per share Amount before bonus options $m Date of payment 35 33 528 15 December 2000 2 July 2001 491 Type Final Interim The final dividend for the year ended 30 September 2000 was paid on 15 December 2000 and is detailed in the Directors’ Report dated 6 November 2000. Review of Operations A review of the operations of the Group during the financial year and the results of those operations are contained in the Chairman’s Letter to Shareholders, the Chief Executive Officer’s Overview and the Chief Financial Officer’s Review. 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: > Net loans and advances increased by 6.3% from $116,315 million to $123,657 million, primarily from growth in mortgage lending and commercial lending in Australia and New Zealand. > Deposits and other borrowings increased by 4.2% from $100,602 million to $104,874 million. > The charge for doubtful debts has been determined using economic loss provisioning and is based on the Group’s risk management models. > The economic loss provision charge increased from $502 million to $531 million reflecting a down grade in the overall risk profile due to the slowing world economy. > Net specific provisions were $520 million, up from $383 million. > Gross non-accrual loans decreased to $1,260 million, or 1.0% of net loans and advances. > On 27 April 2000 the Group announced an on-market buyback of ordinary shares. This was completed on 8 May 2001 and 75.4 million ordinary shares were bought back at a total cost of $1 billion. While the above matters are those considered to be significant changes, reviews of matters affecting the Group’s state of affairs are also contained in the Chairman’s Letter to Shareholders, the Chief Executive Officer’s Overview and the Chief Financial Officer’s Review. Events since the End of the Financial Year Other than the proposed purchase of banking operations in Fiji, Papua New Guinea and Vanuatu (subject to regulatory approval), no matter or circumstance has arisen between 30 September 2001 and the date of this report that has significantly affected or may significantly affect the operations of the Group in future financial years, the results of those operations or the state of affairs of the Group in future years. Future Developments Details of likely developments in the operations of the Group in future financial years are contained in the Chairman’s Letter to Shareholders and the Chief Executive Officer’s Overview. In the opinion of the directors, disclosure of any further information would be likely to result in unreasonable prejudice to the Group. Rounding of Amounts The Company is a company of the kind referred to in the Australian Securities and Investments Commission class order 98/100 dated 10 July 1998 pursuant to section 341(1) of the Corporations Act 2001. As a result, amounts in this report and the accompanying financial statements have been rounded to the nearest million dollars except where otherwise indicated. Shareholdings The directors’ shareholdings, both beneficial and non-beneficial, in the shares of the Company are detailed on page 55 of the 2001 Annual Report. ANZ Annual Report 2001 Directors’ Report Directors’ Report 52 53 Share Options Details of share options issued over un-issued shares granted to directors, senior executives and officers, are shown under Directors’ and Executive Officers’ Emoluments in this report, and in note 49 of the Financial Report. No person entitled to exercise any option has or had, by virtue of an option, a right to participate in any share issue of any other body corporate. The names of all persons who currently hold options granted under the schemes are entered in the register kept by the Company pursuant to section 170 of the Corporations Act 2001. This register may be inspected free of charge. Directors’ Qualifications and Experience The Board includes six non-executive directors who have a diversity of business and community experience and one executive director who has extensive banking experience. The names, qualifications and experience of the directors who are in office at the date of this report are contained on pages 46 and 47 of the 2001 Annual Report and those pages are incorporated in and form part of this report. G K Toomey resigned as a director on 8 October 2001, having held office since before the commencement of the financial year. Special responsibilities and attendance at meetings by directors, are shown on page 55. Directors’ and Executive Officers’ Emoluments The Human Resources Committee (the Committee) of the Board assists the Board in its oversight of major policies and guidelines relating to the management of human resources. The Committee consists of the executive and non-executive directors shown in the table on page 55. The Committee’s responsibilities include the review of proposed remuneration and profit sharing programs. The Committee recommends these programs to the Board for approval and monitors their ongoing operation. It also reviews and approves all remuneration entitlements for senior executives, approving the same or, in the case of Board appointees, makes recommendations to the Board. The Managing Director does not participate in discussions and decisions relating to his own remuneration. The Committee does not set fees for the Chairman or other non-executive directors. These are based on advice received from external advisors and approved by the Board. Non- executive directors’ fees are within the limit set by shareholders at the Annual General Meeting held on 21 January 1998, and are set at levels which fairly represent the responsibilities of, and time spent by, the non-executive directors on Group matters. Regard is also had to the level of fees payable to non-executive directors in comparable companies. The Group’s remuneration policy is to ensure that remuneration packages properly reflect the duties and responsibilities of the senior executives and are sufficient to attract, retain and motivate personnel of the requisite quality. Remuneration packages are structured in such a way that a significant part of the individual’s reward depends upon the achievement of business objectives and the profitability of the Group as measured by the Economic Value AddedTM methodology. All senior executives have performance objectives, including the achievement of key strategic milestones and operating performance targets. These objectives are agreed at the beginning of the performance period. Performance bonus payments are contingent on the achievement of agreed performance goals, assessed through the semi-annual performance management process. Two thirds of the performance related bonus of senior executives, other than the Managing Director, is paid as deferred shares in the Company, with half of these shares deferred a minimum of twelve months and half deferred for a minimum of three years. The issue price of deferred shares is based on the average closing price of the Company’s shares during the five trading days prior to the relevant Board or Shares Committee meeting which approves the issue of the shares. Deferred shares are held in trust by ANZEST Pty Ltd (the trustee of employee incentive plans) and may vest with the senior executive after a minimum relevant period. If the senior executive resigns or is dismissed during a deferral period, the shares are forfeited. Long term incentives in the form of options and shares are also provided to eligible executives in consideration of future performance. Details of the emoluments of each director and of the five most highly paid executives for the Group and the Company are shown on page 53. Director Emoluments Amounts in $ Non-executive directors C B Goode (Chairman) J C Dahlsen R S Deane J K Ellis M A Jackson B W Scott G K Toomey2 Fees Paid Cash Value of deferred shares1 Subsidiary Board Committee Chairman’s fee Superannuation contributions Total 76,000 95,000 95,000 74,000 95,000 68,750 92,418 596,168 239,000 – – 21,000 – 26,250 – 286,250 – – 90,196 – 10,000 – – 100,196 – 10,000 – 10,000 – 10,000 – 30,000 8,416 8,400 7,600 8,400 8,400 8,400 7,393 323,416 113,400 192,796 113,400 113,400 113,400 99,811 57,009 1,069,623 1 Participation in Directors’ Share Plan. Value of shares at the date they were purchased on market 2 Commenced leave of absence from 20 September 2001, resigned 8 October 2001 Executive Emoluments Cash and benefits Amounts in $ Performance related bonus (cash component) Salary or fees Benefits1 Superannuation contributions Executive Management Committee J McFarlane (Managing Director) D L Boyles R A Davis E Funke Kupper P J O Hawkins P R Marriott 1 Benefits include the provision of housing, cars and parking, private health insurance, subsidised loans and certain other expenses 1,422,000 628,372 644,049 660,100 707,500 660,100 – 200,333 198,000 200,333 219,333 205,000 – 35,228 19,551 3,500 3,500 3,500 78,000 36,400 36,400 36,400 39,000 36,400 Total cash and other benefits 1,500,000 900,333 898,000 900,333 969,333 905,000 Deferred shares and options Deferred Shares1 Options granted2, 3, 4 Type I Type II Number Issued Date Number Value $ Number Value $ Exercise Price $ J McFarlane (Managing Director) 100,922 1,593,686 – – 750,000 31/12/00 14.78 D L Boyles 13,231 200,330 25,131 381,785 R A Davis 13,118 197,996 25,018 379,451 E Funke Kupper 13,031 200,335 26,731 408,125 P J O Hawkins 14,370 219,334 26,770 409,314 170,000 80,000 70,000 21/11/00 24/04/01 24/10/01 170,000 80,000 70,000 21/11/00 24/04/01 24/10/01 270,000 95,000 77,000 21/11/00 24/04/01 24/10/01 170,000 80,000 77,000 21/11/00 24/04/01 24/10/01 14.34 13.70 17.05 14.34 13.70 17.05 14.34 13.70 17.05 14.34 13.70 17.05 25,605 13,505 205,001 P R Marriott 14.34 13.70 17.05 1 Deferred shares are held in trust for up to 10 years and are restricted for periods of one year (Type I) or three years (Type II). Subject to the Board determining otherwise the shares are forfeited if the recipient leaves the Group within the restricted period for reasons other than retirement, retrenchment, death or disablement or commits gross misconduct. For J McFarlane, deferred shares are purchased under the Directors’ Share Plan. For the other senior executives deferred shares are issued in lieu of bonus, or as part of long term incentive arrangements. The number of shares issued under long term incentive arrangements is predicated on a market competitive assessment of long term compensation benchmarks. These shares have an additional restriction, and entitlement will only vest in the event of individual performance conditions being met. In the event of retrenchment or retirement the release of long term incentive shares will be pro-rated. 21/11/00 24/04/01 24/10/01 170,000 80,000 73,000 389,866 2 All options expire seven years from the date of grant except for J McFarlane’s which expire four years from the date of grant. These options are exercisable between three and seven years of the date of grant if certain performance conditions are met. Each option entitles the holder to purchase one ordinary fully paid share in the company. The estimated value is calculated using a modified Black Scholes model. Estimated values, per option, at the dates of issue, were: $2.21 (21 November 2000), $2.24 (31 December 2000), $2.21 (24 April 2001), $2.68 (24 October 2001). 3 All options issued except for J McFarlane’s may be exercised only if the ANZ Accumulation Index over the period from the date of grant to the last trading day of any month occurring during the relevant measurement period equals or exceeds (for 50% of the options issued) the ASX 100 Accumulation Index and (for the remaining 50% of the options issued) the Accumulated Banking and Finance Index, both calculated over the same period. 4 J McFarlane’s 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. Subject to the performance conditions being met, J McFarlane’s options are exercisable from 31 December 2003 to 31 December 2004, both dates inclusive. ANZ Annual Report 2001 Directors’ Report Directors’ Meetings Major Committees Directors’ Shareholdings 54 55 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 be permitted under the Corporations Act 2001) incurred in the execution and discharge of 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. 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 when acting as an employee, trustee or officer of the Company, or a subsidiary of the Company at the request of the Company. The indemnity is subject to the Corporations Act 2001 and will not apply in respect of any liability arising from: > a claim by the Company; > a claim by a related body corporate; > a lack of good faith; > illegal or dishonest conduct; or > non compliance with the Company’s policies or discretions. The Company has entered into Deeds of Access, Insurance and Indemnity with each of its directors and secretaries and with certain employees and certain other individuals who act as directors 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 of the company to which they have been appointed. The Company has indemnified the trustees and former trustees of certain of the Company’s superannuation funds and directors, former directors, officers and former 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 the assets of the relevant fund are insufficient to cover any loss, damage, liability or cost incurred by the indemnified person in connection with the fund, being loss, damage, liability or costs for which the indemnified person would have been entitled to be indemnified out of the assets of the fund in accordance with the trust deed and the Superannuation Industry (Supervision) Act 1993. This indemnity survives the termination of the fund. Some of the indemnified persons are or were directors or executive officers of the Company. The Company has also indemnified certain employees of the Company, being trustees and administrators of a trust which is a subsidiary entity, from and against any loss, damage, liability, tax, penalty, expense or claim of any kind or nature arising out of or in connection with the creation, operation or dissolution of the trust, where they are acting in good faith and in a manner that they reasonably believed to be within the scope of the authority conferred by the trust. Except for the above, no person has been indemnified nor has the Company or a related body corporate of the Company made an agreement to indemnify any person who is or has been an officer or auditor of the Company 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 executive officers of the Company, and directors, secretaries and executive officers of related bodies corporate of the Company. In accordance with common commercial practice, the insurance policy prohibits disclosure of the nature of the liability insured against and the amount of the premium. Signed in accordance with a resolution of the directors. Charles Goode Chairman 5 November 2001 John McFarlane Chief Executive Officer Directors’ Meetings The number of Board meetings and Committee meetings held during the year, and attended by each director are set out in the following table: C B Goode J C Dahlsen R S Deane1 J K Ellis M A Jackson J McFarlane B W Scott G K Toomey2 Board Risk Management Audit A 9 9 9 9 9 9 9 8 B 9 9 8 9 8 9 9 6 A 11 – 11 11 – 11 – 10 B 9 – 8 10 – 8 – 5 A 8 8 – – 8 – 8 – B 7 8 – – 6 – 8 – Human Resources B A Executive Committee A B Shares Committee A B Committee of the Board B A 7 – – 6 – 6 7 6 7 – – 5 – 5 7 4 2 1 – – 1 2 – – 2 1 – – 1 2 – – 7 5 – 3 – 1 8 2 7 5 – 3 – 1 8 2 1 – – 1 2 4 – – 1 – – 1 2 4 – – Column A - The number of meetings the director was eligible to attend Column B - The number of meetings attended. The Chairman is an ex-officio member of all Board Committees 1 New Zealand resident 2 New Zealand resident from January 2001; on leave of absence from 20 September 2001; resigned 8 October 2001 Major Committees Audit (Chairman - J C Dahlsen) reviews the Group’s accounting policies and practices; reviews financial statements, due diligence processes in relation to capital raisings and compliance with the Group’s statutory responsibilities; monitors compliance with approved policies and controls; and approves audit plans and the audit fee of the external auditor. Risk Management (Chairman - J K Ellis) oversees all aspects of risk management; and approves the delegation policies, standards and reporting mechanisms for credit risk, market risk, balance sheet risk and operating risk. Human Resources (Chairman - B W Scott) oversees human resources policies and guidelines including remuneration schemes, industrial relations strategies, staff development programs, and assessment of the performance of senior executives. Directors’ Shareholdings Beneficially held C B Goode J C Dahlsen R S Deane J K Ellis M A Jackson J McFarlane B W Scott G K Toomey Shares1 214,782 83,400 75,000 56,370 70,803 631,039 65,609 2,364 Options – – – – – 2,500,000 2 – – Non-beneficially held Shares 142,093 12,000 – – – – – – Total 1 Shares include deferred shares 2 500,000 options exercisable at $12.12 after 1 February 2000; 500,000 options exercisable at $11.40 after 1 June 2001; 750,000 options exercisable at $11.49 after 2,500,000 1,199,367 154,093 31 December 2002 and 750,000 options exercisable at $14.78 after 31 December 2003 with the latter two subject to a performance hurdle that the ANZ accumulation index exceeds the ASX 100 accumulation index calculated over a stated period. ANZ Annual Report 2001 Australia and New Zealand Banking Group Limited and Controlled Entities Consolidated Statement of Financial Performance for the year ended 30 September 2001 Australia and New Zealand Banking Group Limited and Controlled Entities Consolidated Statement of Financial Position as at 30 September 2001 56 57 Total income Interest income Interest expense Net interest income Other operating income Prior period abnormal income Operating income Operating expenses Prior period abnormal expenses Profit before debt provision Provision for doubtful debts Profit before income tax Income tax expense Prior period abnormal tax Total income tax expense Profit after income tax Net profit attributable to outside equity interests Net profit attributable to shareholders of the Company Currency translation adjustments, net of hedges after tax Revaluation of properties Total adjustments attributable to shareholders of the Company recognised directly into equity Total changes in equity other than those resulting from transactions with shareholders as owners Earnings per ordinary share (cents) Basic Diluted Dividend per ordinary share (cents) Net tangible assets per ordinary share ($) Note 2 2 2 2001 $m 12,863 10,251 (6,418) 3,833 2,612 – 6,445 (3,131) – 3,314 (531) 2,783 (911) – (911) 1,872 (2) 1,870 197 – 197 Consolidated 2000 $m 14,031 10,241 (6,440) 3,801 2,583 1,207 7,591 (3,314) (986) 3,291 (502) 2,789 (863) (177) (1,040) 1,749 (2) 1,747 170 31 201 1999 $m 11,061 8,684 (5,029) 3,655 2,377 – 6,032 (3,300) – 2,732 (510) 2,222 (736) – (736) 1,486 (6) 1,480 (215) – (215) 2,067 1,948 1,265 117.4 116.3 73 5.96 106.8 106.3 64 5.49 90.6 90.3 56 5.21 Assets Liquid assets Due from other financial institutions Trading securities Investment securities Net loans and advances Customers’ liabilities for acceptances Life insurance investment assets Regulatory deposits Shares in associates Income tax assets Goodwill Other assets Premises and equipment Total assets Liabilities Due to other financial institutions Deposits and other borrowings Liability for acceptances Income tax liabilities Creditors and other liabilities Provisions Life insurance policy liabilities Bonds and notes Loan capital Total liabilities Net assets Shareholders’ equity Ordinary share capital Preference share capital Reserves Retained profits Share capital and reserves attributable to shareholders of the Company Outside equity interests Total shareholders’ equity Contingent liabilities Note 2001 $m Consolidated 2000 $m 7,794 4,829 4,827 3,487 123,657 14,324 4,774 133 64 1,200 137 18,906 1,361 185,493 12,690 104,874 14,324 1,335 15,948 2,142 4,458 15,340 3,831 174,942 10,551 3,733 1,526 717 4,562 10,538 13 10,551 5,648 5,822 4,126 3,006 116,315 15,482 4,739 103 29 1,227 145 14,566 1,259 172,467 12,247 100,602 15,482 1,303 13,371 2,089 4,360 9,519 3,687 162,660 9,807 4,028 1,374 786 3,607 9,795 12 9,807 4 5 ANZ Annual Report 2001 Australia and New Zealand Banking Group Limited and Controlled Entities Statement of Cash Flows for the year ended 30 September 2001 Notes to the Concise Financial Statements 58 59 1: Accounting Policies This concise financial report has been derived from the Group’s 2001 Financial Report which complies with the Corporations Act 2001, Australian Accounting Standards, Urgent Issues Group Consensus Views and other authoritative pronouncements of the Australian Accounting Standards Board. A full description of the accounting policies adopted by the Group is provided in the 2001 Financial Report. The accounting policies are consistent with those of the previous financial year except for the change disclosed. The directors have elected to adopt early the revised Accounting Standard AASB 1005 ‘Segment Reporting’. Change in Accounting Policy On applying AASB 1041 ‘Revaluation of Non-Current Assets’ with effect from 1 October 2000, the Group has elected to revert to the cost basis for measuring the class of assets land and buildings. Previously, this class of assets was revalued periodically. In changing from a revaluation to a cost policy, the carrying amount of the class of assets land and buildings at the date of first applying the standard is deemed to be their cost. Writedowns of previously revalued assets may no longer be made through the asset revaluation reserve. This change in accounting policy had no impact for the year ended 30 September 2001. 2: Items Reported as Abnormal in Prior Periods 2001 $m Consolidated 2000 $m 1999 $m Profit before tax Revaluation of properties Gain on sale of investment in Colonial Limited Income from sale of Grindlays and associated businesses (Loss) before tax Provisions raised on sale of Grindlays and associated businesses Restructuring provision Provision for litigation Writedown of investment in Panin Bank Total prior period abnormal profit before tax Income tax (expense) benefit applicable to Restatement of deferred tax balances Sale of Grindlays and associated businesses and provisions raised Restructuring provision Provision for litigation Total prior period abnormal income tax expense Total prior period abnormal profit after tax – – – – – – – – – – – – – – 30 33 1,225 (575) (361) (50) (81) 221 (64) (246) 116 17 (177) 44 – – – – – – – – – – – – – – 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 received (paid) Net (increase) decrease in trading securities Net cash provided by operating activities Cash flows from investing activities Net decrease (increase) Due from other financial institutions Regulatory deposits Loans and advances Shares in controlled entities and associates Investment securities Purchases Proceeds from sale or maturity Controlled entities and associates Purchased (net of cash acquired) Proceeds from sale (net of cash disposed) Transferred from controlled entities to associates (net of cash) Premises and equipment Purchases Proceeds from sale Other Net cash (used in) investing activities Cash flows from financing activities Net (decrease) increase Due to other financial institutions Deposits and other borrowings Creditors and other liabilities Bonds and notes Issue proceeds Redemptions Loan capital Issue proceeds Redemptions Decrease in outside equity interests Dividends paid Share capital issues Share buyback Net cash provided by financing activities Net cash provided by operating activities Net cash (used in) investing activities Net cash provided by financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Foreign currency translation on opening balances Cash and cash equivalents at end of year 2001 $m 11,054 75 2,783 (6,703) (1,827) (253) (1,775) (823) (53) (629) 1,849 909 (27) (4,829) (36) (4,005) 3,630 (36) – – (452) 127 529 (4,190) (826) 890 581 7,542 (2,878) – (244) (1) (1,028) 114 (495) 3,655 1,849 (4,190) 3,655 1,314 6,462 1,295 9,071 Consolidated 2000 $m Inflows (Outflows) 9,916 192 2,460 (6,108) (1,735) (283) (1,199) (754) 4 (25) 2,468 (792) (90) (17,633) (50) (8,109) 8,553 (43) 1,510 – (275) 249 (3,160) (19,840) 3,111 12,763 (843) 5,555 (1,341) 152 (147) (19) (749) 36 (1,014) 17,504 2,468 (19,840) 17,504 132 6,634 (304) 6,462 1999 $m 8,679 157 2,089 (5,039) (1,840) (282) (977) (535) – 1,442 3,694 616 828 (12,936) – (5,527) 4,670 (2) – (94) (177) 142 (610) (13,090) (779) 5,202 743 4,330 (479) – (256) (1) (671) 591 – 8,680 3,694 (13,090) 8,680 (716) 8,981 (1,631) 6,634 ANZ Annual Report 2001 Notes to the Concise Financial Statements Notes to the Concise Financial Statements 60 61 3: Dividends Ordinary Dividends Interim dividend Final dividend Bonus option plan adjustment Dividends on ordinary shares 2001 $m 491 595 (24) 1,062 2000 $m 445 528 (32) 941 1999 $m 404 470 (60) 814 A fully franked final dividend of 40 cents, is proposed to be paid on each fully paid ordinary share on 14 December 2001 (2000: final dividend of 35 cents, paid 15 December 2000, fully franked; 1999: final dividend of 30 cents, paid 20 December 1999, partially franked to 80%). The 2001 interim dividend of 33 cents, paid 2 July 2001, was fully franked (2000: interim dividend of 29 cents, paid 3 July 2000, fully franked; 1999: interim dividend of 26 cents, paid 5 July 1999, partially franked to 75% ). The tax rate applicable to the franking credits attached to the interim dividend and to be attached to the proposed final dividend is 30% (2000: 34%, 1999: 36%). Preference Dividends Dividends on preference shares 2001 $m 119 2000 $m 102 1999 $m 72 In 1998 the Company issued 124,032,000 preference shares, raising USD 775 million via Trust Securities issues. The Trust Securities carry an entitlement to a distribution of 8.00% (on USD 400 million) and 8.08% (on USD 375 million). The amounts are payable quarterly in arrears. Shown above are amounts paid for the year to 30 September 2001 (2000: full year to 30 September 2000; 1999: from their dates of issue, 23 September 1998 and 19 November 1998, to 30 September 1999). Payment dates are the fifteenth days of January, April, July and October in each year. Dividend Franking Account The amount of franking credits available for the subsequent financial year is nil (2000 and 1999: nil), after adjusting for franking credits that will arise from the payment of tax on Australian profits for the 2001 financial year less 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. 4: Share Buybacks The Company conducted the following on-market buybacks during the year to 30 September 2001: Date of Announcement1 Date Buyback Completed 27 April 2000 1 Date of the directors’ resolution approving the buyback 2 Consideration is allocated to Share Capital 8 May 2001 5: Contingent Liabilities No. of ordinary shares bought back 34.6 million % of ordinary shares bought back 2.3% Average price per share $14.30 Total Consideration 2 $m 495 There are outstanding court proceedings, claims and possible claims against the Group, the aggregate amount of which cannot readily be quantified. Where appropriate, legal advice has been obtained and, in the light of such advice, provisions have been made as deemed necessary. Details covering indemnities and other matters arising from the Grindlays sale on 31 July 2000 are contained in the 2001 Financial Report. 6: Segment Analysis During the year ended 30 September 2001, the Group managed its activities along the following lines of business: Personal, Corporate and International and Subsidiaries. Corporate Centre, Technology and Finance combines the central support and shared service units of the Group, including the results of asset and liability management and earnings on central capital. A description of each of the operating business segments, including the types of products and services the segments provide to customers, is detailed in the 2001 Financial Report. Business Segment Analysis1, 2 Consolidated 30 September 2001 Total income Net interest income Other external operating income Net intersegment income Operating income Other external expenses Net intersegment expenses Operating expenses Profit before debt provision Doubtful debt provision Income tax and outside equity interests Profit after income tax Total assets Total liabilities Business Segment Analysis1, 2 Consolidated 30 September 2000 Total income Net interest income Other external operating income Net intersegment income Operating income Other external expenses Net intersegment expenses Operating expenses Profit before debt provision Doubtful debt provision Income tax and outside equity interests Profit after income tax Personal $m Corporate $m International & Subsidiaries $m Corporate Centre, Technology & Finance $m Discontinued Businesses $m Consolidated Total $m 6,306 2,196 951 118 3,265 (1,372) (359) (1,731) 1,534 (205) (450) 879 73,528 40,228 4,524 819 1,140 (36) 1,923 (594) (146) (740) 1,183 (178) (268) 737 1,977 615 508 (91) 1,032 (417) (83) (500) 532 (91) (157) 284 48 174 31 9 214 (750) 593 (157) 57 (42) (33) (18) 8 29 (18) – 11 2 (5) (3) 8 (15) (5) (12) 12,863 3,833 2,612 – 6,445 (3,131) – (3,131) 3,314 (531) (913) 1,870 68,191 58,818 26,416 26,978 16,270 47,950 1,088 968 185,493 174,942 Personal $m Corporate $m International & Subsidiaries $m Corporate Centre, Technology & Finance $m 5,517 1,985 869 146 3,000 (1,332) (374) (1,706) 1,294 (192) (391) 711 4,041 723 1,004 (45) 1,682 (574) (141) (715) 967 (153) (212) 602 1,789 1,743 613 446 (92) 967 (450) (40) (490) 477 (87) (170) 220 143 27 (9) 161 (709) 596 (113) 48 (8) 24 64 Discontinued Businesses & Abnormals 3,4 $m 941 337 1,444 – 1,781 (1,235) (41) (1,276) 505 (62) (293) 150 909 2,184 Consolidated Total $m 14,031 3,801 3,790 – 7,591 (4,300) – (4,300) 3,291 (502) (1,042) 1,747 172,467 162,660 Total assets Total liabilities 1 Results are equity standardised 2 Intersegment transfers are accounted for and determined on an arms length basis 3 Results of Grindlays and associated businesses sold on 31 July 2000 to Standard Chartered Bank are included here 4 Includes abnormal items in year ended 30 September 2000 65,161 50,705 66,896 36,004 24,372 25,325 15,129 48,442 ANZ Annual Report 2001 Notes to the Concise Financial Statements Directors’ Declaration Auditors’ Report Financial Highlights in Key Currencies Exchange Rates 62 63 6: Segment Analysis (continued) The Group operates in Australia, New Zealand and Overseas markets. Overseas operations are conducted in UK and Europe, Asia, Pacific and Americas. As a result of the sale of the Grindlays operations, the Group no longer has material operations in South Asia and the Middle East. Geographic Segment Analysis 2001 2000 Australia New Zealand Overseas markets Total Income $m 9,046 2,024 1,793 12,863 Assets $m 133,035 22,337 30,121 185,493 Income $m 7,991 1,843 4,197 14,031 Assets $m 127,306 20,354 24,807 172,467 7: Events Since the End of the Financial Year On 8 October 2001, ANZ announced, subject to regulatory approval, the acquisition of operations in Papua New Guinea, Fiji and Vanuatu, for approximately USD 50 million. The acquisitions comprise the operations of the Bank of Hawaii in those countries. Directors’ Declaration The directors of Australia and New Zealand Banking Group Limited declare that the accompanying concise financial report of the consolidated Group is fairly presented as an abbreviation of the Group’s 30 September 2001 Financial Report and complies with Australian Accounting Standard AASB 1039 ‘Concise Financial Reports’. In our report on the Group’s 2001 Financial Report we declared that: (a) the financial statements and notes comply with the Corporations Act 2001, including: (i) complying with applicable Australian Accounting Standards and other mandatory professional reporting requirements; and (ii) giving a true and fair view of the financial position of the Company and of the consolidated Group and of their performance as represented by the results of their operations and their cash flows; and (b) in the directors’ opinion at the date of this declaration there are reasonable grounds to believe that the Company and consolidated Group will be able to pay its debts as and when they become due and payable. Signed in accordance with a resolution of the directors Charles Goode Chairman 5 November 2001 John McFarlane Chief Executive Officer To the members of Australia and New Zealand Banking Group Limited Scope We have audited the concise financial report of Australia and New Zealand Banking Group Limited and its controlled entities for the financial year ended 30 September 2001 consisting of the statement of financial performance, statement of financial position, statement of cash flows, accompanying notes as set out on pages 56 to 62, and the accompanying discussion and analysis on pages 8 to 11 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 in accordance with Australian Auditing Standards to provide reasonable assurance whether the concise financial report is free of material misstatement. We have also performed an independent audit of the full financial report of Australia and New Zealand Banking Group Limited and its controlled entities for the year ended 30 September 2001. Our audit report on the full financial report was signed on 5 November 2001, and was not subject to any qualification. Financial Highlights in Key Currencies Millions Profit and loss Net income Operating expenses Profit before tax and debt provision Provision for doubtful debts Profit before tax Income tax expense Outside equity interests Profit after tax Our procedures in respect of the audit of the concise financial report included testing that the information in the concise financial report is consistent with the full financial report and examination, on a test basis, of evidence supporting the amounts, discussion and analysis, and other 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 report is presented fairly in accordance with Accounting Standard AASB 1039 ‘Concise Financial Reports’ issued in Australia. The audit opinion in this report has been formed on the above basis. 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 2001 complies with AASB 1039 ‘Concise Financial Reports’. KPMG Chartered Accountants Melbourne 5 November 2001 P S Nash Partner 2001 AUD 2001 USD1 2001 GBP1 2001 NZD1 6,445 (3,131) 3,314 (531) 2,783 (911) (2) 1,870 3,371 (1,638) 1,733 (278) 1,455 (476) (1) 978 2,338 (1,136) 1,202 (193) 1,009 (330) (1) 678 Balance Sheet Assets Liabilities Shareholders’ equity2 Ratios – per ordinary share Earnings per share – basic Dividends per share – declared rate Net tangible assets per share 1 USD, GBP and NZD amounts – profit and loss converted at average rates for financial year 30 September 2001 and balance sheet items at closing rates at 185,493 174,942 10,551 90,947 85,774 5,173 61,788 58,273 3,515 42.6 26 $1.99 117.4 73 $5.96 61.4 38 $2.92 30 September 2001 2 Includes outside equity interests Exchange Rates The exchange rates used in the translation of the results and the assets and liabilities of major overseas branches and controlled entities are: Great British pound United States dollar New Zealand dollar 2001 2000 1999 Closing Average Closing Average Closing Average 0.3331 0.4903 1.2127 0.3627 0.5230 1.2473 0.3720 0.5444 1.3324 0.3903 0.6101 1.2647 0.3972 0.6533 1.2598 0.3932 0.6403 1.2014 8,039 (3,905) 4,134 (662) 3,472 (1,136) (2) 2,334 224,947 212,152 12,795 146.4 91 $7.23 ANZ Annual Report 2001 Shareholder Information Ordinary shares At 9 October 2001 the twenty largest holders of ordinary shares held 879,019,333 ordinary shares, equal to 59.1 per cent of the total issued ordinary capital. Name Number of shares % Name Number of Shares % Chase Manhattan Nominees Ltd National Nominees Ltd Westpac Custodian Nominees Ltd Citicorp Nominees Pty Ltd ANZ Nominees Ltd AMP Life Ltd RBC Global Services Australia Nominees Pty Ltd Commonwealth Custodial 259,425,473 17.43 164,911,251 11.08 8.73 129,970,745 4.18 62,257,042 2.74 40,797,225 1.98 29,485,998 Cogent Nominees Pty Ltd ING Life Ltd HSBC Custody Nominees Ltd ANZEST Pty Ltd Perpetual Trustees Nominees Ltd NRMA Nominees Pty Ltd The National Mutual Life Association 28,281,407 1.90 of Australasia Government Superannuation Office Perpetual Trustees Victoria Ltd Australian Foundation Investment Company Ltd 17,186,097 1.15 14,923,462 1.00 13,803,993 0.93 10,628,264 0.71 8,754,900 0.59 7,332,734 0.49 6,486,755 0.44 6,020,779 0.40 4,933,409 0.33 4,677,049 0.31 879,019,333 59.06 Services Ltd 26,635,838 Queensland Investment Corporation 22,661,039 19,845,873 MLC Ltd 1.79 1.52 1.33 Distribution of shareholdings At 9 October 2001 Range 1 to 1,000 shares 1,001 to 5,000 shares 5,001 to 10,000 shares 10,001 to 100,000 shares Over 100,001 shares Total Number of holders 93,015 68,479 11,693 7,436 412 181,035 % of holders 51.4 37.8 6.5 4.1 0.2 100 Number of shares 44,184,391 155,789,882 83,198,231 161,086,569 1,044,017,447 1,488,276,520 % of shares 3.0 10.5 5.6 10.8 70.1 100 At 9 October 2001: > there was one entry in the Register of Substantial Shareholdings. Franklin Resources Inc. and its affiliates held 97,535,676 shares equal to 6.55 percent of the total issued ordinary capital; and the average size of holdings of ordinary shares was 8,221 (2000: 8,403) shares; and there were 1,772 holdings of less than a marketable parcel (less than $500 in value (or 30 shares based on a market price of $16.45)), (2000: 1,762 holdings), which is less than 1% 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; and (ii) on a poll, 1 vote for each fully paid ordinary share. Preference shares At 9 October 2001 Hare and Co was the only holder of preference shares and held 124,032,000 preference shares, being 100 per cent of the total issued preference capital. Voting rights of preference shares A preference shareholder may not vote in normal circumstances, but may vote: (i) when a preference share dividend (or equivalent) is not paid by the prescribed quarterly payment date. This entitlement to vote ceases after full payment of four consecutive quarterly preference share dividends; and (ii) on proposals or resolutions that affect the rights attached to the preference shares including proposals to restructure or wind up ANZ. Employee shareholder information At the Annual General Meeting in January 1994, shareholders approved an aggregate limit of 7% of all classes of shares and options, which remain subject to the rules of a relevant incentive plan, being held by employees and directors. At 30 September 2001 participants held 2.27% of the issued shares and options of ANZ under the following incentive plans: > ANZ Employee Share Acquisition Plan; and > ANZ Share Option Plan. Shareholder Information Dividends The final dividend of 40 cents per share will be paid on 14 December 2001, 100% franked. Dividends may be paid directly to a bank account in Australia, New Zealand or the United Kingdom. Shareholders who want their dividends paid this way should contact ANZ Share Registry at the addresses shown below. Dividend Reinvestment and Bonus Option plans are available to shareholders. The plans are detailed in a booklet called ‘Shareholder Alternatives’, copies of which are available from ANZ Share Registry at the addresses shown below. Stock Exchange Listings The Group’s ordinary shares are listed on the Australian Stock Exchange and the New Zealand Stock Exchange. The Capital Securities offered in 1993 and the Preference Shares issued in 1998 are listed on the New York Stock Exchange. American Depositary Receipts The Bank of New York sponsors an American Depositary Receipt (ADR) program in the United States of America and ADRs are listed on the New York Stock Exchange. ADR holders should deal directly with the Bank of New York, New York, telephone (212) 462 6618, fax (212) 462 6211 on all matters relating to their ADR holdings. Credit Ratings Short Term Moody’s Investors Service Standard & Poor’s Rating Group Long Term Moody’s Investors Service Standard & Poor’s Rating Group ANZ Registered Office Level 6, 100 Queen Street Melbourne, Victoria 3000 Australia Tel: (61 3) 9273 6141 Fax: (61 3) 9273 6142 Secretary: J. Slatter Investor Relations Level 20, 100 Queen Street Melbourne, Victoria 3000 Australia Tel: (61 3) 9273 6466 Fax: (61 3) 9273 4899 investor.relations@anz.com P-1 A1+ Aa3 (outlook stable) AA- (outlook stable) ANZ Share Registry Australia Level 12, 565 Bourke Street Melbourne, Victoria 3000 Australia Tel: 1800 11 33 99 Fax: (61 3) 9611 5710 anzshareregistry@computershare.com.au New Zealand Private Bag 92119 Auckland 1020 New Zealand Tel: 0800 174 007 Fax: (64 9) 488 8787 United Kingdom Tel: (44 870) 702 0000 2001 Financial Report A copy of the Group’s 2001 Financial Report, including the independent Auditors’ Report, is available to all shareholders, and will be sent to shareholders without charge upon request. The Financial Report can be requested by telephone (Australia 1800 11 33 99, Overseas 61 3 9615 5989) by email at investor.relations@anz.com or viewed directly on the internet at www.anz.com. Annual General Meeting The Annual General Meeting will be held on 14 December 2001, at The Westin, No. 1 Martin Place, Sydney commencing at 10:00am. www.anz.com