commonwealth bank of australia new ......this document should be read in conjunction with the...

COMMONWEALTH BANK OF AUSTRALIA NEW ZEALAND OPERATIONS

GENERAL DISCLOSURE STATEMENT

For the year ended

30 June 2009

Commonwealth Bank of Australia NZ Operations

General Disclosure Statement

30 June 2009

The Reserve Bank Orders in Council require Registered Banks licensed in New Zealand to produce a General

Disclosure Statement prepared in accordance with the Financial Reporting Act 1993 and the Orders, and that such

Statements be made available to the public on request. This General Disclosure Statement has been produced in

compliance with those Orders and consists of two parts:

Part A - Commonwealth Bank of Australia New Zealand Banking Group (the “Banking Group”) General

Disclosure Statement

The New Zealand banking group of the Commonwealth Bank of Australia (the “CBA”) comprises:

• CBA New Zealand Branch (the “Registered Bank”) and various 100% owned CBA subsidiaries controlled by

CBA New Zealand Branch. The CBA New Zealand Branch operates independently of the ASB Group

operations within New Zealand and is a separately registered financial institution in terms of the Reserve Bank of

New Zealand Act 1989. The registered bank for the purposes of this Disclosure Statement is CBA New Zealand

Branch. CBA New Zealand Branch was issued a registered banking licence on 23 June 2000 AND

• ASB Banking Operations as disclosed in the ASB Bank Limited General Disclosure Statement, together with the

immediate parent of ASB Bank Limited, ASB Holdings Limited, and ASB Funding Limited, a funding company for

the CBA New Zealand Operations that is 100% owned by ASB Holdings Limited. ASB Holdings Limited is the

ultimate holding company in New Zealand, owned as at the date of these financial statements, 100% by the

Commonwealth Bank of Australia. The assets of ASB Holdings Limited consist mainly of its investments in

Subsidiaries.

Part B - Commonwealth Bank of Australia New Zealand Life Insurance Group (the “Life Group”) Disclosures

The New Zealand life insurance activities of the Commonwealth Bank of Australia have not been included in the

Banking Group General Disclosure Statement. Equivalent disclosures, where applicable, have been provided to

assist interested parties to understand the entire New Zealand operations of the Commonwealth Bank of Australia.

The Life Group is the aggregation of the life insurance activities of ASB Group (Life) Limited, The Colonial Mutual

Life Assurance Society Limited New Zealand Branch, Colonial First State Investments (NZ) Limited, Colonial First

State Investment Managers (NZ) Limited and Colonial Holding Company Limited New Zealand Branch.


30 June 2009For the year ended

COMMONWEALTH BANK OF AUSTRALIANEW ZEALAND OPERATIONS

PART A

NEW ZEALAND BANKING GROUP

Contents

1 - 7 General Disclosures8 Historical Summary of Aggregated Financial Statements9 Income Statement

10 Statement of Recognised Income and Expense11 Balance Sheet12 Cash Flow Statement

13 - 68 Notes to the Financial Statements13 - 21 1 Statement of Accounting Policies

22 2 Interest Income22 3 Interest Expense22 4 Discontinued Activities

22 - 23 5 Other Income23 6 Operating Expense Disclosures23 7 Auditor's Remuneration23 8 Taxation23 9 Dividends24 10 Cash and Call Deposits with the Central Bank24 11 Due from Other Banks24 12 Money Market Advances24 13 Securities

25 - 26 14 Derivative Financial Instruments27 15 Advances to Customers

27 - 34 16 Credit Risk Management and Asset Quality35 - 36 17 Controlled Entities and Associates

36 18 Other Assets37 19 Property, Plant and Equipment38 20 Intangible Assets39 21 Deferred Taxation Asset / (Liability)39 22 Due to Other Banks40 23 Money Market Deposits40 24 Deposits from Customers40 25 Other Liabilities

41 - 42 26 Subordinated Debt43 27 Head Office Account and Contributed Capital43 28 Asset Revaluation Reserves43 29 Available for Sale Reserves43 30 Cash Flow Hedge Reserves44 31 Foreign Currency Translation Reserves44 32 Retained Earnings44 33 Minority Interests45 3445 35 Reconciliation of Cash and Cash Equivalents to the Balance Sheet45 36 Imputation and Policyholder Credit Accounts

46 - 47 37 Related Party Transactions and Balances48 38 Directors and Key Management Personnel

48 - 49 39 Credit and Capital Commitments, and Contingent Liabilities49 40 Leasing and Other Commitments50 41 Fair Value of Financial Instruments

51 - 57 42 Capital Adequacy57 43

58 44 Financial Reporting by Segments59 - 68 45 Risk Management Policies

68 46 Events after the Balance Sheet Date69 - 70 Auditor's Report

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

Reconciliation of Net Profit after Taxation to Net Cash Flows from Operating Activities

General Disclosure StatementCommonwealth Bank of Australia New Zealand Banking Group

GENERAL MATTERS

1.0 Registered Bank and Address for Service

Commonwealth Bank of Australia New Zealand BranchLevel 21, ASB Bank Centre135 Albert StreetAucklandNew Zealand

2.0 Overseas Bank and Address for Service

Commonwealth Bank of AustraliaLevel 748 Martin PlaceSydneyAustralia

3.0 Ranking of Local Creditors in a Winding-Up

3.1 Requirement for Commonwealth Bank of Australia to maintain sufficient assets in Australia to cover an ongoing obligation to paydeposit liabilities in Australia

Section 13A(4) of the Banking Act 1959 of the Commonwealth of Australia states that it is an offence for an ADI not to hold assets in Australia of a value that is equal to or greater than the total amount of its deposit liabilities in Australia, unless APRA has authorised the ADI to hold assets of a lesser value. This requirement has the potential to impact on the management of the liquidity of the New Zealand operations of the Commonwealth Bank of Australia in extreme circumstances.

The CBA Group provides a wide range of banking, financial and related services including funds management and life and general insurance. The origins of the Bank lie in the former Commonwealth Bank of Australia which was established in 1911 by an Act of Parliament to conduct commercial and savings bank functions. These functions were gradually expanded under continued Government ownership until September 1991 when the Bank was partially privatised. In July 1996 the Commonwealth Government sold its remaining shareholding in the Bank.

Under Section 13A(3) of the Banking Act 1959 of the Commonwealth of Australia, if an Authorised Deposit-taking Institution ("ADI") (which includes a bank) becomes unable to meet its obligations or suspends payment, the assets of the ADI in Australia are to be available to meet the ADI’s liabilities in the following order: (a) first, the ADI's liabilities to APRA, to the extent that APRA has made, or is required to make, payments to depositors under the Financial Claims Scheme; (b) second, the ADI's debts to APRA for costs incurred by APRA in the administration of the Scheme in respect of that ADI; (c) third, in payment of the ADI's deposit liabilities in Australia (other than liabilities covered under paragraph (a)); and (d) fourth, the ADI's other liabilities.

Section 16(1) and (2) of the Banking Act 1959 of the Commonwealth of Australia provides that, despite anything contained in any law relating to the winding up of companies, but subject to Section 13A(3) of the Banking Act 1959, the debts of an ADI to the Australian Prudential Regulation Authority ("APRA") in respect of APRA’s costs (including costs in the nature of remuneration and expenses) of being in control of the ADI’s business or of having an administrator in control of the ADI’s business have priority in a winding up of the ADI over all other unsecured debts.

Section 86 of the Reserve Bank Act 1959 of the Commonwealth of Australia provides that notwithstanding anything contained in any law relating to the winding up of companies, but subject to Section 13A(3) of the Banking Act 1959, debts due to the Reserve Bank of Australia by an ADI shall, in the winding up, have priority over all other debts other than debts due to the Commonwealth of Australia. The Commonwealth Bank of Australia is an ADI.

This document comprises the General Disclosure Statement for the Commonwealth Bank of Australia New Zealand Banking Group (the "Banking Group") of Commonwealth Bank of Australia New Zealand Operations (the "CBA NZ Operations") and Commonwealth Bank of Australia New Zealand Branch (the "Registered Bank") as at 30 June 2009. The business of the Registered Bank comprises all banking business transacted in New Zealand through the New Zealand branch. This information is published in accordance with the Registered Bank Disclosure Statement (Full and Half-Year Overseas Incorporated Registered Banks) Order 2008 and pursuant to Section 81(1) of the Reserve Bank of New Zealand Act 1989.

This document should be read in conjunction with the disclosures for Commonwealth Bank of Australia New Zealand Life Insurance Group (the "Life Group") of the CBA NZ Operations.

A copy of the Commonwealth Bank of Australia's most recent published Financial Statements will be available immediately upon a request being made to the above address. A copy of the Financial Statements may also be obtained from the Commonwealth Bank of Australia's website (www.commbank.com.au) in the Shareholder Centre.

The Commonwealth Bank of Australia ("CBA") operates as a public company under the Corporations Act in Australia. It has share capital and is governed by a constitution. CBA was converted from a statutory corporation to a public company on 17 April 1991.

The Registered Bank has not published a supplementary disclosure statement because none of the information required to be disclosed applies to the Banking Group.

The Overseas Bank is the Commonwealth Bank of Australia, domiciled in Australia. The Overseas Banking Group is the Commonwealth Bank of Australia including subsidiary activities worldwide.

1

4.0 Guarantee Arrangements

4.1

4.2

(i)

(ii)

(iii)

(iv) "Not Complex"

The guarantee of deposits up to and including AUD 1 million applies without charge. The Government has stated the guarantee will operate for a period of three years from 12 October 2008. The guarantee applies to deposits denominated in any currency.

Guarantee Scheme

The Scheme guarantee will terminate 67 calendar months after the Final Application Date notified by the Government.

The most recent audited financial statements of the Commonwealth of Australia can be obtained at the Treasury’s Budget website www.budget.gov.au under the budget tab.

The Guarantee Scheme applies, without limit, to deposit liabilities in excess of AUD 1 million (per customer per ADI) and to wholesale funding liabilities. The Scheme commenced on 28 November 2008. Any claim for payment must be made in accordance with the Scheme deed and rules.

A liability will only be covered by the Scheme if it is the subject of an Eligibility Certificate issued in accordance with the Rules. The Rules prescribe the criteria which must be satisfied before a certificate can be issued, and the application process and fees applicable. The ADI must provide certain statements and legal documents, before it obtains coverage.

Facsimile +61 2 6253 7333

Further details of the guarantee arrangements, together with relevant legislation, regulations, the Scheme deed and rules, and other documents setting out the terms and conditions of the guarantee arrangements, are available at the Treasury website www.treasury.gov.au and at www.guaranteescheme.gov.au.

Deposit Liabilities over AUD 1 million

Deposits may be denominated in any currency and there are no restrictions on the type of depositor. Deposits may be at call or with maturities up to 60 months.

Deposits up to and including AUD 1 million

On 12 October 2008 the Australian Government announced guarantee arrangements for deposits and wholesale funding of Australian deposit-taking institutions. Commonwealth Bank of Australia is an eligible Authorised Deposit-taking Institution (“ADI”) under the terms of the guarantee arrangements. The guarantee arrangements also apply to the Registered Bank, as a foreign branch of an eligible institution.

The guarantee of deposits up to and including AUD 1 million is provided under Commonwealth legislation. It only applies to protected accounts with ADI's. A protected account is an account that is kept by an account holder with an ADI that is either prescribed by regulation or an account, or covered financial product, that is kept under an agreement between the account holder and the ADI requiring the ADI to pay the account holder on demand, or at an agreed time, the net credit balance.

Various deposit accounts, such as saving, call, current, cheque, debit card, transaction, and mortgage offset accounts, have been declared to be covered financial products.

The Australian Government Guarantee Scheme for Large Deposits and Wholesale Funding ("Guarantee Scheme") formally commenced on 28 November 2008. Interim arrangements applied until that date, with deposits and eligible wholesale borrowings guaranteed without charge in this period.

Under the Guarantee Scheme, eligible ADIs can obtain guarantees for deposit balances totalling over one million Australian dollars ("AUD 1 million") per customer and for wholesale funding liabilities, in return for a fee (which is calculated to reflect the ADI's credit rating and may be passed on by the ADI). Access to the Guarantee Scheme is voluntary. Separate arrangements apply for deposit balances totalling up to and including AUD 1 million per customer per institution . Such deposits are guaranteed by the Australian Government under the Financial Claims Scheme and this guarantee is free.

Eligible institutions wanting to access the Guarantee Scheme for their large deposit balances or wholesale funding from 28 November 2008 need to apply to the Scheme Administrator.

These are the same as short term funding liabilities, except that the term covered must be 15 to 60 months; and the instruments must be bonds, notes or debentures.

The Government has published detailed guidelines at www.guaranteescheme.gov.au under the Guidance Note link. For example, generally, market or index linked investment products and structured products are excluded.

Short term wholesale funding liabilities

These are senior unsecured debt instruments; in any currency; with maturities up to 15 months; issued in bearer, registered or dematerialised form; which are "not complex"; and which are bank bills, certificates of deposit, transferable deposits, debentures or commercial paper.

Applications can also be made for issuance programmes.

Term funding liabilities

General

The Government has indicated that the guarantee arrangements may require refinement or adjustment in light of market developments, and has indicated that it will review them on an ongoing basis and will revise them if necessary.

Guarantor's name and address for service under Wholesale Funding Guarantee:

The Commonwealth of Australiac/o Australian Government Solicitor50 Blackall StreetBARTON ACT 2600Attention: Director, Canberra

2

4.0 Guarantee Arrangements (continued)

Fitch Ratings

Moody's Investors Service, Inc.

Standard & Poor's (Australia) Pty Limited

4.3

ASB Bank Limited is also guaranteed under the New Zealand Wholesale Funding Guarantee Facility ("Crown Wholesale Funding Guarantee") on the terms and conditions of a Crown Wholesale Funding Guarantee Deed entered into by ASB Bank Limited and the Crown on 19 June 2009. The Crown Wholesale Funding Guarantee is available (upon application and subject to the Crown's sole and absolute discretion on each occasion) on a case by case basis for certain debt securities issued by ASB Bank Limited to the wholesale market. As at the signing of this General Disclosure Statement ASB Bank Limited had not applied for cover under the Crown Wholesale Funding Guarantee for any of its issued debt securities. The Registered Bank does not have a guarantee under the Crown Wholesale Funding Guarantee.

Long Term Ratings (and Any Qualifications)Rating Agency

These ratings have remained unchanged in the two preceding years. The outlook from all agencies is stable.

As at the date of the signing of this General Disclosure Statement, the following ratings were assigned to the Commonwealth of Australia's long term, AUD denominated debt:

Also on 12 October 2008 the New Zealand Minister of Finance announced a Deposit Guarantee Scheme ("Scheme"), under which the Crown guarantees retail deposits of participating financial institutions from 12 October 2008 until 12 October 2010. The Registered Bank does not have a guarantee under the Scheme. However, ASB Bank Limited, a member of the Banking Group with its own separate banking licence is covered by the Scheme. On 25 August 2009 the Minister of Finance announced that the government intends to extend the Scheme and changesome of its terms and conditions. The extension will start on 13 October 2010 and end on 31 December 2011. Information on the Scheme is available on the Treasury website www.treasury.govt.nz.

AAA

Aaa

AAA

New Zealand Guarantee Arrangements

Descriptions of the steps in the ratings scales above are set out on page 6.

3

5.0 Directorate and Auditor

5.1

Directors New Zealand Chief Executive OfficerCommonwealth Bank of Australia Commonwealth Bank of Australia New Zealand BranchLevel 7 Level 21, ASB Bank Centre48 Martin Place 135 Albert StreetSydney AucklandAustralia New Zealand

NEW ZEALAND CHIEF EXECUTIVE OFFICER

Name A.J. (Andrew) Woodward, Head of Institutional Banking NZ CBAPrimary Occupation BANK EXECUTIVEResidence Auckland, New ZealandExternal Directorships Australian Banker's Association, Business Council of Australia and Financial Markets Foundation for Children

5.2 Directors of the Commonwealth Bank of Australia

EXECUTIVE DIRECTOR

Name Sir R.J. (Ralph) Norris DCNZM, FNZIM, FNZCS (Managing Director)

Primary Occupation CHIEF EXECUTIVE OFFICERResidence New South Wales, AustraliaExternal Directorships Nil

INDEPENDENT DIRECTORS

Name J.M. (John) Schubert, BE, PhD, Name C.R. (Colin) Galbraith, LLMFIE Aust, FTS, CP(Eng) (Chairman) LLB (Hons), AM

Primary Occupation COMPANY DIRECTOR Primary Occupation COMPANY DIRECTORResidence New South Wales, Australia Residence Victoria, AustraliaExternal Directorships G2 Therapies Limited, BHP Billiton Limited, External Directorships BHP Billiton Community Trust, OneSteel

BHP Billiton Plc, Qantas Airways Limited, Limited, Australian InstituteGreat Barrier Reef Foundation of Company Directors

Name J.S. (Jane) Hemstritch BSc, FCA, FCPA Name R.J. (Reg) Clairs AOPrimary Occupation COMPANY DIRECTOR Primary Occupation COMPANY DIRECTORResidence Victoria, Australia Residence Queensland, AustraliaExternal Directorships The Global Foundation, Tabcorp Limited External Directorships David Jones Limited

Name S.C.H. (Carolyn) Kay BA, LLB, FAICD Name F.D. (Fergus) Ryan Primary Occupation COMPANY DIRECTOR Primary Occupation COMPANY DIRECTORResidence New South Wales, Australia Residence Victoria, AustraliaExternal Directorships Brambles Industries Limited, External Directorships Australian Foundation Investment Company

Allens Arthur Robinson, Sydney Institute Limited, National Australia Day Council, National Library of Australia,Centre for Social Impact

Name Sir J.A. (John) Anderson KBE Name H.H. (Harrison) YoungPrimary Occupation COMPANY DIRECTOR Primary Occupation COMPANY DIRECTORResidence Wellington, New Zealand Residence Victoria, AustraliaExternal Directorships Television New Zealand, External Directorships Florey Neuroscience Institutes

Capital Coast District Health Board, Asia Society AustralAsia Centre and Asia Link, New Zealand Venture Investment Fund, Howard Florey Institute Foundation,Hawke's Bay District Health Board Financial Services Volunteer Corps

Name D.J. (David) Turner FCA Name A.M. (Andrew) MohlPrimary Occupation COMPANY DIRECTOR Primary Occupation COMPANY DIRECTORResidence United Kingdom Residence New South Wales, AustraliaExternal Directorships Cobham plc External Directorships AMP Foundation, Export Finance and

Insurance Corporation

AUDIT COMMITTEE

All members of the Audit Committee are independent directors.

Address for Directors and the New Zealand Chief Executive Officer

There have been no changes to Directors since the 31 March 2009 General Short Form Disclosure Statement was signed.

The Board's Audit Committee consists of Fergus Ryan (Chairman), Colin Galbraith, Carolyn Kay, David Turner and Harrison Young.

4

5.0 Directorate and Auditor (continued)

5.3 Responsible Person

C.J.S. (Charles) PinkManaging Director and Chief Executive OfficerAuckland, New Zealand

In AbsenceS.B. (Stewart) McRobieChief Financial OfficerAuckland, New Zealand

5.4 Name and Address for Service of Auditor

PricewaterhouseCoopersChartered Accountants188 Quay StreetAucklandNew Zealand

5.5 Dealings with Directors

6.0as from 26 November 2007

6.1

6.2

6.3

(i)

(ii)

(a)

●

●

(b)

(c)

(d)

6.4

6.5

(i)

(ii)

6.6 That the Commonwealth Bank of Australia complies with the requirements imposed on it by the Australian Prudential Regulation Authority.

the total consolidated assets of the group headed by the latter entity;

otherwise, the size of each insurance business conducted by any entity within the Banking Group shall equal the total liabilities relating to that insurance business, plus the equity retained by the entity to meet the solvency or financial soundness needs of the insurance business;

the amounts measured in relation to parts (a) and (b) shall be summed and compared to the total consolidated assets of the Banking Group. All amounts in parts (a) and (b) shall relate to on balance sheet items only, and shall be determined in accordance with generallyaccepted accounting practice, as defined in the Financial Reporting Act 1993;

where products or assets of which an insurance business is comprised also contain a non-insurance component, the whole of such products or assets shall be considered part of the insurance business.

That the business of the Registered Bank does not constitute a predominant proportion of the business of the Commonwealth Bank of Australia.

That no appointment to the position of the New Zealand chief executive officer of the Registered Bank shall be made unless:

the Reserve Bank has been supplied with a copy of the curriculum vitae of the proposed appointee; and

the Reserve Bank has advised that it has no objection to that appointment.

In measuring the size of the Banking Group's insurance business:

where insurance business is conducted by any entity whose business predominantly consists of insurance business, the size of that insurance business shall be:

the total consolidated assets of the group headed by that entity;

or if the entity is a subsidiary of another entity whose business predominantly consists of insurance business,

The registration of the New Zealand branch of Commonwealth Bank of Australia (the "Registered Bank'') is subject to the following conditions:

That the Banking Group does not conduct any non-financial activities that in aggregate are material relative to its total activities, where the term material is based on generally accepted accounting practice, as defined in the Financial Reporting Act 1993.

That the Banking Group's insurance business is not greater than 1 percent of its total consolidated assets. For the purposes of this condition:

Insurance business means any business of the nature referred to in section 4 of the Insurance Companies (Ratings and Inspections) Act 1994 (including those to which the Act is disapplied by sections 4(1)(a) and (b) and 9 of that Act), or any business of the nature referred to insection 3(1) of the Life Insurance Act 1908;

There have been no dealings with Directors of any entities within the Banking Group or of Commonwealth Bank of Australia or parties related to these Directors on terms other than in the ordinary course of business. Refer to Note 38 for outstanding balances with Directors of entities withinthe Banking Group.

Directors of entities within the Banking Group are required to table all possible conflicts of interest at the Board of Directors' meetings for those entities, and are required to abstain from any vote on those proceedings. Entities within the Banking Group comply with all requirements of the Companies Act 1993 in terms of registers and notices for Directors' conflict of interest.

Conditions of Registration - Commonwealth Bank of Australia New Zealand Branch (the "Registered Bank")

A number of Directors of Commonwealth Bank of Australia have given written notices, stating that they hold office in specified companies and accordingly are to be regarded as having an interest in any contract or proposed contract that may be made between the Commonwealth Bank of Australia and any of those companies.

5

6.0

6.7

–

–

6.8

6.9

6.10

7.0 Pending Proceedings or Arbitration

7.1

8.0 Credit Rating of Commonwealth Bank of Australia

8.1

Fitch Ratings



8.2 Long Term Debt Rating Definitions

Long Term Debt Rating Fitch Moody's S&P(a) (b) (a)

Highest quality / Extremely strong capacity to pay interest and principal AAA Aaa AAAHigh quality / Very strong AA Aa AAUpper medium grade / Strong A A A

Medium grade (lowest investment grade) / Adequate BBB Baa BBBPredominantly speculative / Less near term vulnerability to default BB Ba BBSpeculative, low grade / Greater vulnerability B B B

Poor to default / Identifiable vulnerability CCC Caa CCCHighest speculations CC Ca CCLowest quality, no interest C C C

In payment default, in arrears - questionable value D - D

(a)

(b)

Fitch and S&P apply plus (+) or minus (-) signs to ratings from ‘AA’ to ‘CCC’ to indicate relative standing within the major rating categories.

Moody's applies numeric modifiers to each generic rating category from Aa to B, indicating that the counterparty is (1) in the higher end of its letter-rating category, (2) in mid-range, (3) in lower end.

That liabilities of the Registered Bank in New Zealand, net of amounts due to related parties (including amounts due to a subsidiary or affiliate of the Registered Bank), do not exceed NZ$15 billion.

That the Commonwealth Bank of Australia complies with the following minimum capital adequacy requirements, as administered by the Australian Prudential Regulation Authority:

That retail deposits of the Registered Bank in New Zealand do not exceed $200 million. For the purposes of this condition retail deposits are defined as deposits by natural persons, excluding deposits with an outstanding balance which exceeds $250,000.

For the purposes of these conditions of registration, the term "Banking Group" means the New Zealand operations of the Commonwealth Bank of Australia and those subsidiaries of the Commonwealth Bank of Australia (except those which conduct life assurance business) whose business is required to be reported in financial statements for the group's New Zealand business prepared in accordance with Section 9(2) of the Financial Reporting Act 1993.

The Banking Group is not party to any pending proceedings or arbitration which are expected to have a material adverse effect on the financial position, or results, of the CBA NZ Operations or CBA NZ Branch.

As at the date of the signing of this General Disclosure Statement, the following ratings were assigned to the Commonwealth Bank of Australia's long term debt:

The Fitch rating was assigned as AA and has remained unchanged since 1999. The Moody's rating was raised to Aa1 from Aa3 on 4 May 2007. The Standard and Poor's rating was raised to AA from AA- on 21 February 2007.

Tier One Capital of the Commonwealth Bank of Australia is not less than 4 percent of risk weighted exposures;

Aa1 Negative

AA Stable

AA Stable

OutlookRating Agency

Capital of the Commonwealth Bank of Australia is not less than 8 percent of risk weighted exposures.

Conditions of Registration - Commonwealth Bank of Australia New Zealand Branch (the "Registered Bank") as from 26 November2007 (continued)

There have been no changes to the conditions of registration since the signing of the previous disclosure statement (for the period ending 31 March 2009).

Current Long Term Rating

6

Historical Summary of Aggregated Financial Statements

$ millionsFor the year ended 30 June 2009 2008 2007 2006 2005

INCOME STATEMENT

Interest Income 5,165 5,147 4,142 3,425 2,829

Interest Expense 4,150 4,128 3,273 2,656 2,092

Net Interest Earnings 1,015 1,019 869 769 737

Other Income 509 331 491 374 297

Total Operating Income 1,524 1,350 1,360 1,143 1,034

Impairment Losses on Advances 305 47 17 19 16

Total Operating Income after Impairment Losses 1,219 1,303 1,343 1,124 1,018

Total Operating Expenses 639 595 539 504 478

Net Profit before Taxation 580 708 804 620 540

Taxation 201 218 239 196 173

Net Profit after Taxation 379 490 565 424 367

Of which Impaired Asset Expense / (Recovery) 154 26 8 (1) (1)

DIVIDENDS and REPATRIATIONS PAID

Dividends paid to Minority Interests 34 34 31 30 18

Ordinary Dividends - 512 530 689 -

Redeemable Preference Dividends 57 57 30 160 -

Distribution of Prior Year Profit - 8 5 7 4

Total Dividends and Repatriations Paid 91 611 596 886 22

$ millionsAs at 30 June 2009 2008 2007 2006 2005

BALANCE SHEET

Total Assets 72,056 66,323 58,532 48,511 41,684

Of which Impaired Assets 420 30 10 5 32

Total Liabilities 68,631 62,913 55,796 46,624 39,559

Total Shareholders' Equity 3,425 3,410 2,736 1,887 2,125

Banking Group

Banking Group

The amounts disclosed in this historical summary of aggregated financial statements have been taken from the audited financial statements of the Banking Group, which were prepared in accordance with New Zealand equivalents to International Financial Reporting Standards ("NZ IFRS")

8

Income Statement

$ millionsFor the year ended 30 June Note 2009 2008 2009 2008

Interest Income 2 5,165 5,147 663 881

Interest Expense 3 4,150 4,128 623 849

Net Interest Earnings 1,015 1,019 40 32

Other Income 5 509 331 45 15

Total Operating Income 1,524 1,350 85 47

Impairment Losses on Advances 16 (b) 305 47 67 7

Total Operating Income after Impairment Losses 1,219 1,303 18 40


Salaries and Other Staff Expenses 375 351 6 5

Building Occupancy and Equipment Expenses 103 101 - -

Information Technology Expenses 65 54 - -

Other Expenses 96 89 1 1

Net Profit before Taxation 580 708 11 34

Taxation 8 201 218 4 12

Net Profit after Taxation 379 490 7 22

Attributable to:

Parent Company Shareholders 345 456 7 22

Minority Interests 33 34 34 - -


Banking Group Registered Bank

These statements are to be read in conjunction with the notes on pages 13 to 68 and the Auditor's Report on pages 69 and 70.

9

Statement of Recognised Income and Expense


Items Recognised Directly in Equity:

Movement in Asset Revaluation Reserves 28 1 2 - -

Net Change in Available for Sale Reserves 29 (4) 19 - -

Net Change in Cash Flow Hedge Reserves 30 (471) (185) 6 2

Net Change in Investment Hedge 31 (304) (78) - -

Currency Translation Differences 31 305 78 - -

32 - 1 - -

Net (Expense) / Income Recognised Directly in Equity (473) (163) 6 2


(94) 327 13 24

Attributable to:Parent Company Shareholders (128) 293 13 24

Minority Interests 33 34 34 - -

(94) 327 13 24



Total Recognised Income and Expense

Total Recognised Income and Expense

Transfer from Asset Revaluation Reserves to Retained Earnings

10

Balance Sheet

$ millionsAs at 30 June Note 2009 2008 2009 2008

ASSETSCash and Call Deposits with the Central Bank 10 1,582 1,155 44 59Due from Other Banks 11 1,258 637 3,250 3,738Money Market Advances 12 159 1,223 - - Securities 13 6,773 5,402 597 440Derivative Assets 14 2,517 1,249 308 268Advances to Customers 15 58,846 55,773 5,648 6,530Current Taxation Asset 44 74 1 8Other Assets 18 254 320 30 81Property, Plant and Equipment 19 154 159 - - Intangible Assets 20 394 331 - - Deferred Taxation Asset 21 75 - 19 4

Total Assets 72,056 66,323 9,897 11,128

Total Interest Earning and Discount Bearing Assets 68,432 64,070 9,495 10,708

Financed by:

LIABILITIESDue to Other Banks 22 8,851 7,800 5,262 5,341Money Market Deposits 23 20,670 20,040 - - Derivative Liabilities 14 4,239 1,193 151 450Deposits from Customers 24 29,978 27,821 396 851Other Liabilities 25 450 735 21 78Deferred Taxation Liability 21 - 195 - - Subordinated Debt 26 4,443 5,129 3,582 4,136

Total Liabilities 68,631 62,913 9,412 10,856

SHAREHOLDERS' EQUITYHead Office Contribution 27 462 262 462 262Contributed Capital - Ordinary Shareholder 27 704 704 - - Asset Revaluation Reserves 28 30 29 - - Available for Sale Reserves 29 15 19 - - Cash Flow Hedge Reserves 30 (465) 6 (5) (11)Foreign Currency Translation Reserve 31 1 - - - Retained Earnings 32 857 569 28 21

Ordinary Shareholder's Equity 1,604 1,589 485 272

Contributed Capital - Redeemable Preference Shareholder 27 1,271 1,271 - -

Total Shareholders' Equity Attributed to Parent Company Shareholders 2,875 2,860 485 272

Minority InterestControlled Entities 33 550 550 - -

Total Shareholders' Equity 3,425 3,410 485 272

Total Liabilities and Shareholders' Equity 72,056 66,323 9,897 11,128

Total Interest and Discount Bearing Liabilities 62,107 53,396 9,240 10,328



11

Cash Flow Statement


CASH FLOWS FROM OPERATING ACTIVITIESInterest Received 5,280 5,064 709 865Other Income Received 834 831 121 33Dividends Received 2 3 - - Interest Paid (4,285) (4,000) (691) (811)Operating Expenses (642) (528) (8) (7)Net Taxation Paid (125) (196) (10) (11)(Payments to) / Receipts from Related Parties for Tax Related Items (63) 22 - -

1,001 1,196 121 69

Changes in Operating Assets and LiabilitiesNet Decrease / (Increase) in Money Market Advances 907 (1,813) - - Net Decrease / (Increase) in Due from Other Banks (Term) 489 423 479 (44)Net (Increase) / Decrease in Advances to Customers (3,369) (5,202) 814 (1,028)Net Increase in Trading Securities (2,187) (1,837) (158) (110)Net Increase / (Decrease) in Customer Deposits 1,456 3,322 (455) 17Net Increase in Money Market Deposits 1,412 1,786 - - Net Increase / (Decrease) in Due to Other Banks (Term) 1,820 761 (83) 1,140

Cash Flows from Operating Assets and Liabilities 528 (2,560) 597 (25)

Net Cash Flows from Operating Activities 34 1,529 (1,364) 718 44

CASH FLOWS FROM INVESTING ACTIVITIES

Cash was provided from:Net Decrease / (Increase) in Other Securities 1,190 (569) - -

1,190 (569) - -

Cash was applied to:Acquisition of Controlled Entities Net of Cash Acquired 46 - - - Purchase of Property, Plant and Equipment 32 25 - - Purchase of Intangible Assets 37 33 - -

115 58 - -

Net Cash Flows from Investing Activities 1,075 (627) - -

CASH FLOWS FROM FINANCING ACTIVITIESCash was provided from:

Head Office Contribution 200 8 200 8Issue of Ordinary Share Capital - 170 - - Issue of Redeemable Preference Shares - 780 - - Issue of Subordinated Debt - 531 - 120

200 1,489 200 128Cash was applied to:

Dividends Paid 57 540 - - Dividends Paid to Minority Interests 34 34 - - Repatriation of Profit - 8 - 8Redemption of Subordinated Debt 1,107 780 946 120

1,198 1,362 946 128

Net Cash Flows from Financing Activities (998) 127 (746) -

SUMMARY OF MOVEMENTS IN CASH FLOWS

Net Increase / (Decrease) in Cash and Cash Equivalents 1,606 (1,864) (28) 44Add: Cash and Cash Equivalents at Beginning of Year 560 2,424 68 24Cash and Cash Equivalents at End of Year 35 2,166 560 40 68


Cash Flows from Operating Profits before Changes in Operating Assets and Liabilities

Registered BankBanking Group

12

Notes to the Financial Statements For the year ended 30 June 2009

1 Statement of Accounting Policies

GENERAL ACCOUNTING POLICIES

Basis of Preparation

Critical Accounting Estimates and Judgements

Presentation Currency and Rounding

PARTICULAR ACCOUNTING POLICIES

(a) Basis of Consolidation

Subsidiaries

Other Controlled EntitiesThe Banking Group may invest in or establish special purpose entities ("SPE") to enable it to undertake specific transactions. The main type of specific transactions of these SPE are securitisation vehicles and structured finance entities. Where the Banking Group has established SPE which are controlled by the Banking Group to facilitate transactions undertaken for Banking Group purposes, these are consolidated in the Banking Group's financial statements (refer to Note 17).

The measurement base adopted is that of historical cost as modified by the fair value measurement of Available for Sale Financial Assets, Financial Instruments at Fair Value through Profit or Loss, Derivative contracts and the revaluation of certain Property, Plant and Equipment.

The functional and presentation currency of the Banking Group is New Zealand dollars. The amounts contained in this disclosure statement and the financial statements are presented in millions of New Zealand dollars, unless otherwise stated.

Subsidiaries are those entities controlled by CBA New Zealand Branch or the banking activities of ASB Holdings Limited. Control exists when the Banking Group has the power, directly or indirectly, to govern the financial and operating policies of entities so as to obtain benefits from their activities. The financial statements of subsidiaries are included in the Banking Group's financial statements from the date on which control is transferred to the Banking Group until the date that control ceases.

Assets, liabilities and results of subsidiaries are included in the Banking Group's financial statements on the basis of financial statements made up to balance date, using the purchase method. All intra group balances and transactions have been eliminated in preparing the consolidated financial statements.

A Glossary of Terms included within the Statement of Accounting Policies is set out on page 21.

Preparation of the financial statements requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates, although it is not anticipated that such differences would be material.

There have been no material changes to accounting policies in the year ended 30 June 2009. All policies have been applied on a basis consistent with that used during the financial year ended 30 June 2008.

NZ IAS 27 Consolidated and Separate Financial Statements (revised) changes aspects of accounting for non-controlling interests and clarifies the accounting for changes in a parent's ownership interest in a subsidiary.

Estimates and assumptions are continually evaluated, and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The Banking Group considers that the valuation of financial instruments, the Provision for Impairment on Customer Advances and impairment testing of Goodwill require significant accounting estimates and management judgement. Refer to (f) for details of valuation of financial instruments, Note 16 for details of credit risk management and the basis of the Banking Group's impairment provision model, and Note 20 for key assumptions used in testing Goodwill for impairment.

The critical judgements used by management in applying the accounting policies that have the most significant effect on the amounts recognised in the financial statements, apart from those involving estimation, are the designation of financial assets and financial liabilities as at fair value through profit or loss.

NZ IFRS 3 Business Combinations (revised) will result in certain measurement changes and additional disclosures in the event of a business combination.

NZ IFRS 7 Financial Instruments: Disclosures (revised) will result in additional disclosures concerning fair value measurement and liquidity risk.

NZ IFRS 8 Operating Segments will affect the financial and descriptive information disclosed about the Banking Group's reportable segments.

The following new standards and amendments to standards relevant to the Banking Group are not yet effective and have not yet been applied in preparing the financial statements. These standards have been adopted from 1 July 2009 and are not expected to have any impact on the Banking Group's reported profit or financial position.

NZ IAS 1 Presentation of Financial Statements (revised) will result in presentation of a Statement of Comprehensive Income and a Statement of Changes in Equity.

The reporting entity is Commonwealth Bank of Australia New Zealand Branch (the "Registered Bank"), which holds the banking licence for the purposes of this disclosure statement. The reporting group (the "Banking Group") is the aggregated results of: Commonwealth Bank of Australia New Zealand Branch, ASB Holdings Limited, ASB Funding Limited, ASB Bank Limited and its controlled entities, CBA Funding (NZ) Limited and its subsidiaries, CBA NZ Holding Limited and its subsidiary, CBA Real Estate Funding (NZ) Limited and its subsidiary, CBA USD Funding Limited and Group Treasury Services NZ Limited. The basis of aggregation is an addition of the Banking Group entities' individual financial statements. All transactions and balances between entities within the Banking Group have been eliminated.

The Banking Group's financial statements have been prepared in accordance with New Zealand Generally Accepted Accounting Practice ("NZ GAAP")They comply with NZ IFRS and other applicable Financial Reporting Standards, as appropriate for profit-oriented entities. The financial statements comply with International Financial Reporting Standards.

These financial statements have been drawn up in accordance with the requirements of the Companies Act 1993, the Financial Reporting Act 1993 andthe Registered Bank Disclosure Statement (Full and Half-Year - Overseas Incorporated Registered Banks) Order 2008. They were approved for issue by the Directors on 24 September 2009.

The Directors do not have the power to amend the financial statements once issued.

13


1 Statement of Accounting Policies (continued)

(a) Basis of Consolidation (continued)

Associates

(b) Segment Reporting

(c) Foreign Currency Translation

(d) Revenue Recognition

Interest Income and Expense

Lending Fees

Commission and Other Fees

Other Income

(e) Expense Recognition

(f) Financial Instruments

BASIS OF RECOGNITION AND MEASUREMENT

For financial instruments measured at amortised cost, the effective interest method is used to measure the Interest Income or Expense recognised in the Income Statement.

For financial instruments measured at fair value, Interest Income or Expense is recognised on an accrual basis, either daily or on a yield to maturity basis.

The Banking Group offers an extensive range of financial instruments. Financial instruments are transacted on a commercial basis to derive an interest yield / cost with terms and conditions having due regard to the nature of the transaction and the risks involved. All financial instruments are accounted for on a settlement date basis. They are classified in one of the following categories at initial recognition: Financial Assets at Fair Value through Profit or Loss, Available for Sale Financial Assets, Loans and Receivables, Held to Maturity, Financial Liabilities at Fair Value through Profit or Loss and Other Financial Liabilities.

All foreign currency monetary assets and liabilities are converted at the rates of exchange ruling as at balance date. Foreign currency forward, futures, swaps and option positions are valued at fair value as at balance date. Unrealised gains and losses arising from these revaluations and gains and losses arising from foreign exchange dealings are recognised immediately in the Income Statement.

Dividend income is recorded in the Income Statement when the Banking Group's right to receive the dividend is established. Realised and unrealised gains and losses from re-measurement of Financial Instruments at Fair Value through Profit or Loss are included in Other Income.

The foreign currency assets and liabilities of overseas subsidiaries are translated into the Banking Group's presentation currency at the rate of exchange ruling as at balance date. Income Statements are translated at the weighted average rates for the year. All resulting exchange differences are recognised in the Foreign Currency Translation Reserve ("FCTR") as a separate component of equity. Gains or losses accumulated in the FCTR are transferred to the Income Statement upon partial or full disposal of the overseas subsidiary.

The Banking Group does not consolidate SPE that it does not control. As it can sometimes be difficult to determine whether the Banking Group has control of an SPE, judgements are made about its exposure to the risks and rewards and whether the majority pass to the Banking Group, as well as about its ability to make operational and financial decisions for the SPE in question.

Some of these categories require measurement at fair value. Where available, quoted market prices are used as a measure of fair value. Bid prices are used to estimate fair values of assets, whereas offer prices are applied to liabilities. Where the Banking Group has assets and liabilities with offsetting market risk, it uses mid-market prices as a basis for establishing fair values for the offsetting risk positions and applies a bid / offer spread adjustment to the net open position as appropriate. Where quoted market prices do not exist, fair values are estimated using present value or other market accepted valuation techniques, using methods and assumptions that are based on market conditions and risks existing as at balance date. If changes in these assumptions to a reasonably possible alternative would result in a significantly different fair value this has been disclosed.

The Banking Group's primary reporting format is business segments (refer to Note 44). Segments reported are in line with the organisational structure of the Banking Group and take into account the nature of the products and services provided.

The Banking Group operates predominantly within New Zealand. On this basis geographical segment reporting is not applicable.

Operating lease payments are recognised in the Income Statement on a straight-line basis over the term of the lease, unless another systematic basis is more representative of the time pattern of the benefit received. All other expenses are recognised in the Income Statement on an accrual basis.

Fees and direct costs relating to loan origination, financing or restructuring and to loan commitments are deferred and amortised to Interest Income over the life of the loan using the effective interest method. Lending fees not directly related to the origination of a loan are recognised over the period of service.

Revenue is recognised to the extent that it is probable that economic benefits will flow to the Banking Group and that the revenue can be reliably measured. The principal sources of revenue are interest income, fees and commissions.

Financial instruments are classified in the manner described in (f). Some are measured by reference to amortised cost, others by reference to fair value.

When commissions or fees relate to specific transactions or events, they are recognised in the Income Statement when the service is provided to the customer. When they are charged for services provided over a period, they are taken to Other Income on an accruals basis as the service is provided.

Associates are those entities in which the Banking Group has significant influence, but not control, over the financial and operating policies. The Banking Group has representation on the Boards of Directors of all companies classified as Associates. Associates are accounted for under the equity method of accounting.

14



(f) Financial Instruments (continued)FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

Due from Other Banks

Money Market Advances

Securities

Derivative Assets

Due from Other Banks

Advances to Customers

Other Assets

Assets in this category are either held for trading or are managed with other assets and liabilities transacted in ASB Bank Limited's Treasury and Financial Markets Division, which are accounted for and evaluated on a fair value basis. Fair value reporting of these assets and liabilities reflects the Banking Group's risk management process, which includes utilising natural offsets where possible and managing the overall risks of the Treasury portfolio on a trading basis.

Certain amounts within Due to Other Banks and Money Market Deposits have been designated as at Fair Value through Profit or Loss, where designation eliminates or significantly reduces an accounting mismatch that would otherwise arise from measuring assets and liabilities or recognising the gains or losses on them in different bases. These amounts are managed with other assets and liabilities accounted for and evaluated on a fair value basis.

Due from Other Banks is defined by the nature of the counterparty and includes loans, nostro balances and settlement account balances due from other banks. Amounts Due from Other Banks booked in ASB Bank Limited are measured at Fair Value. Fair value is calculated on the same basis as for Money Market Advances.

Cash and Call Deposits with the Central Bank include ASB Bank Limited's overnight settlement account with the Central Bank, and are brought to account at face value.

Other Assets include the accrual of interest coupons and fees receivable. For derivatives any accrued interest is recognised and measured as part of the derivative's fair value.

Securities included in this category are short and long term public and other debt securities, which are held for trading, as well as securities designated as at Fair Value through Profit or Loss. The fair value of Securities is based on quoted market prices, where available, or calculated using discounted cash flow models based on current market rates.

Derivative Assets that do not meet the criteria for hedge accounting are recorded at Fair Value through Profit or Loss. Refer to (g) for more details on derivatives.

AVAILABLE FOR SALE FINANCIAL ASSETSAvailable for Sale Financial Assets are measured at fair value, with changes in fair value recognised directly in Equity. The Banking Group has classified certain equity investments (in entities over which the Banking Group has neither control nor significant influence) as Available for Sale Financial Assets.

Advances are reported net of Provisions for Impairment to reflect the estimated recoverable amounts. Refer to (m).

Due to Other Banks is defined by the nature of the counterparty and includes deposits, vostro balances and settlement account balances due to other banks. Money Market Deposits are Certificates of Deposit, Issued Paper and other deposits that are transacted in the Treasury and Financial Markets Division of ASB Bank Limited.

Liabilities in this category are measured at fair value and include:

HELD TO MATURITY INVESTMENTS

Due to Other Banks and Money Market Deposits

Liabilities in this category are either held for trading or are managed with other assets and liabilities transacted in ASB Bank Limited's Treasury and Financial Markets Division, which are accounted for and evaluated on a fair value basis. Fair value reporting of these assets and liabilities reflects the Banking Group's risk management process, which includes utilising natural offsets where possible and managing the overall risks of the Treasury portfolio on a trading basis.

FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS

Assets in this category are measured at amortised cost. The Banking Group has not classified any financial assets as Held to Maturity.

Assets in this category are measured at fair value and are described below.

Subsequent changes in the fair value of securities which are either held for trading or designated as at Fair Value through Profit or Loss, are recognised in Other Income and may include interest income depending on the instrument. Coupon securities exclude interest income, whereas all other securities include interest income.

Advances cover all forms of lending to customers, other than those classified as at Fair Value through Profit or Loss, and include mortgages, overdrafts, personal loans and credit card balances. They are recognised in the Balance Sheet when cash is advanced to the customer.

Money Market Advances are advances transacted in ASB Bank Limited's Treasury and Financial Markets Division, which are managed with other assets and liabilities accounted for and evaluated on a fair value basis.

LOANS AND RECEIVABLESAssets in this category are measured at amortised cost using the effective interest method and include:

Cash and Call Deposits with the Central Bank

Amounts Due from Other Banks booked in ASB Bank Limited are measured at Fair Value. Amounts booked by other members of the Banking Group are not managed on a fair value basis and are recorded at amortised cost.

Fair value is calculated using discounted cash flow models based on the interest rate repricing and maturity of the Advances. Discount rates applied in this calculation are based on current market interest rates for Advances with similar credit profiles.

15



(f) Financial Instruments (continued)

Derivative Liabilities

Due to Other Banks and Money Market Deposits

Deposits from Customers

Other Liabilities

Subordinated Debt

(g) Derivative Financial Instruments

Derivative Financial Instruments at Fair Value through Profit or Loss

(h) Hedge Accounting

Cash Flow Hedge Accounting

The Banking Group uses derivatives as part of its asset and liability management activities to manage exposures to interest rate, foreign currency and credit risks, including exposures arising from forecast transactions. The Banking Group applies either Cash Flow or Fair Value Hedge accounting when transactions meet the specified criteria to obtain hedge accounting treatment. The Banking Group has predominantly used Cash Flow Hedge accounting. The Banking Group also uses non-derivative financial instruments to hedge its net investment in foreign operations.

Derivative Liabilities that do not meet the criteria for hedge accounting are recorded at Fair Value through Profit or Loss. Refer to (g) for more details on derivatives.

The Banking Group discontinues hedge accounting when it is determined that a hedge has ceased to be highly effective; when the derivative expires, or is sold, terminated, or exercised; when the hedged item matures or is sold or repaid; when a forecast transaction is no longer deemed highly probable; or when the Banking Group elects to revoke the hedge designation.

A fair valuation gain or loss associated with the effective portion of a derivative designated as a Cash Flow Hedge is recognised initially in Cash Flow Hedge Reserves. The ineffective portion of a fair valuation gain or loss is recognised immediately in the Income Statement. When the transaction or item that the derivative is hedging (including cash flows from transactions that were only forecast when the derivative hedge was effected) affects income or expense then the associated gain or loss on the hedging derivative is simultaneously transferred from Cash Flow Hedge Reserves to the corresponding income or expense line item in the Income Statement.

This category includes all financial liabilities other than those at Fair Value through Profit or Loss. Liabilities in this category are measured at amortised cost and include:

Subordinated Debt is recognised in the Balance Sheet including accrued interest as both components are subordinate to other liabilities. When fair value hedge accounting is applied to fixed rate Subordinated Debt, the carrying value at amortised cost is adjusted for changes in fair value related to the hedged risk.

When a hedging derivative expires or is sold, the hedge no longer meets the criteria for hedge accounting, or the Banking Group elects to revokethe hedge designation, the cumulative gain or loss on the hedging derivative remains in the Cash Flow Hedge Reserve until the forecast transaction occurs and affects income, at which point it is transferred to the corresponding income or expense line. If a forecast transaction is nolonger expected to occur, the cumulative gain or loss on the hedging derivative previously reported in Cash Flow Hedge Reserves is immediately transferred to Other Income.

Derivative instruments are contracts whose value is derived from one or more underlying financial instruments or indices defined in the contract. The Banking Group enters into derivative transactions including foreign exchange contracts, forward rate agreements, futures, options, interest rate swaps, currency swaps and combinations of these instruments. The sale of derivatives to customers as risk management products and their use for trading purposes is integral to the financial markets activities of ASB Bank Limited. Derivatives are also used to manage the Banking Group’s own exposure to market risk.

The fair value of Deposits, Certificates of Deposit and Issued Paper is calculated using discounted cash flow models based on the interest rate repricing and maturity of the instruments. The discount rates applied in this calculation are based on current market rates.

The Banking Group recognises derivatives in the Balance Sheet at their fair value. Fair values are obtained from market yields and discounted cash flow models or option pricing models as appropriate. Derivative Assets are the fair value of derivatives which have a positive fair value. Derivative Liabilities are the fair value of derivatives which have a negative fair value.

All derivatives that do not meet the criteria for hedge accounting under NZ IAS 39 Financial Instruments: Recognition and Measurement are classified as at Fair Value through Profit or Loss. This includes derivatives transacted as part of the trading activity of ASB Bank Limited's Treasury and Financial Markets Division, as well as derivatives transacted as economic hedges, but not qualifying for hedge accounting. Changes in fair value are reflected in the Income Statement immediately when they occur.

Capital instruments are classified as financial liabilities or equity instruments in accordance with the substance of the contractual terms of the instrument. Where instruments are determined to contain both liability and equity components, such components are classified separately. The fair value of the liability component is calculated using discounted cash flow models. This amount is recorded as a financial liability on an amortised cost basis until extinguished on redemption of the instrument. The remainder of the proceeds of the instrument are recognised in Equity, net of income tax effects.

OTHER FINANCIAL LIABILITIES

Other Liabilities include the accrual of interest coupons and fees payable. For derivatives any accrued interest is recognised and measured as part of the derivative's fair value.

This represents amounts Due to Other Banks and Money Market Deposits, apart from those designated as at Fair Value through Profit or Loss. When fair value hedge accounting is applied to fixed rate Deposits or Issued Paper, the carrying value at amortised cost is adjusted for changes in fair value related to the hedged risk.

Deposits from Customers cover all forms of funding apart from Money Market Deposits and include transactional and savings accounts, term deposits and credit balances on cards.

16



(h) Hedge Accounting (continued)

Fair Value Hedge Accounting

Net Investment Hedge Accounting

(i) Leasing

(j) Repurchase and Reverse Repurchase Agreements

(k) Offsetting Financial Instruments

(l) Derecognition of Financial Instruments

(m) Asset Quality

IMPAIRED ASSETS

(a)

(b)(c)

OTHER DEFINITIONS

(a)(b)

For qualifying Fair Value Hedges the change in fair value of the hedging derivative is recognised within Other Income in the Income Statement. Those changes in fair value of the hedged item which are attributable to the risks hedged with the derivative instrument are reflected as an adjustment to the carrying value of the hedged item, which is also recognised in Other Income. If the hedging instrument expires or is sold, terminated or exercised, if the hedge no longer meets the criteria for hedge accounting, or the Banking Group revokes the hedge designation, the difference between the carrying value of the hedged item at that point and the value at which it would have been carried had the hedge never existed (the "unamortised fair value adjustment") is maintained as part of the carrying value of the hedged item and amortised to the Income Statement based on a recalculated effective interest rate.

A Renegotiated Asset is any credit exposure that would otherwise be past due or impaired whose terms have been renegotiated.

Securities sold under agreements to repurchase are retained within the relevant security portfolio and accounted for accordingly. The obligation to repurchase is recorded as a Money Market Deposit or Due to Other Banks, depending on the counterparty. The difference between the sale and repurchase price represents Interest Expense and is recognised in the Income Statement over the term of the repurchase agreement. Securities held under reverse repurchase agreements are recorded as Money Market Advances or Due from Other Banks, depending on the counterparty. The difference between the purchase and sale price represents Interest Income and is recognised in the Income Statement over the term of the reverse repurchase agreement.

The Banking Group offsets financial assets and financial liabilities and reports the net balance in the Balance Sheet where there is a legally enforceable right to set-off and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.

Impaired Assets consist of restructured assets, assets acquired through the enforcement of security and other impaired assets.

A restructured asset is any credit exposure which is impaired and for which:the original terms have been changed to grant the counterparty a concession that would not otherwise have been available, due to the counterparty's difficulties in complying with the original terms;

An Asset under Administration is any credit exposure which is not an Impaired Asset or a Past Due Asset but which is to a counterparty:who is in receivership, liquidation, bankruptcy, statutory management or any form of administration in New Zealand; or

the revised terms of the facility are not comparable with the terms of new facilities with comparable risks; and

who is in any other equivalent form of voluntary or involuntary administration in an overseas jurisdiction.

the yield on the asset following restructuring is equal to, or greater than, the Banking Group's average cost of funds, or that a loss is not otherwise expected to be incurred.

Assets acquired through the enforcement of security are those real estate and other assets acquired in full or partial satisfaction of a debt.

Other impaired assets means any Credit Exposure for which an impairment loss is required in accordance with NZ IAS 39.

A Past Due Asset is any credit exposure where a counterparty has failed to make a payment when contractually due, and which is not an Impaired Asset. A 90day Past Due Asset is any past due asset which has not been operated by the counterparty within its key terms for at least 90 days and which is not an Impaired Asset.

Hedges of Net Investments in foreign operations are accounted for in a similar manner to Cash Flow Hedges. Any gain or loss on the hedging instrument relating to the effective portion of the hedge is recognised in a separate component of equity. The gain or loss relating to the ineffective portion is recognised in the Income Statement within Other Income. On disposal of the foreign operation, the gain or loss accumulated in equity is transferred to the Income Statement.

Leases where the Banking Group retains substantially all the risks and rewards of ownership of an asset are classified as Operating Leases. Operating Lease rental revenue and expense is recognised in the Income Statement on a straight line basis over the term of the lease, unless another systematic basis is more representative of the time pattern of the benefit received. The Banking Group classifies assets leased out under Operating Leases as Property, Plant and Equipment. The assets are depreciated over their useful lives on a basis consistent with similar assets.

Financial liabilities are derecognised when the obligation specified in the contract is discharged, cancelled or expires.

Financial assets are derecognised either when sold, or when the rights to receive cash flows from the financial assets have expired or have been transferred, or when the Banking Group has transferred substantially all the risks and rewards of ownership. In transactions where substantially all the risk and rewards are neither retained nor transferred, the Banking Group derecognises assets when control is no longer retained, or when control is retained the assets are recognised to the extent of the Banking Group's continuing involvement.

Leases under which the Banking Group transfers substantially all the risks and rewards of ownership of an asset to the lessee or a third party areclassified as Finance Leases. When assets are held subject to a Finance Lease, the present value of the lease payments including any guaranteed residual value is recognised as a receivable and is reported within Advances to Customers. The difference between the gross receivable and the present value of the receivable is treated as unearned finance income. Lease Income is recognised over the lease term so asto produce a constant periodic rate of return on the net investment in the Finance Lease.

17



(m) Asset Quality (continued)

PROVISION FOR IMPAIRMENT

(a)(b)(c)

(d)(e)

(n) Investments in Controlled Entities and Associates

(o) Property, Plant and Equipment

Buildings 10-100 yearsFurniture and Fittings 5-25 yearsComputer and Office Equipment, and Operating Software 3-10 yearsOther Property, Plant and Equipment 2-25 years

Loans and Receivables are reviewed at each balance date to determine whether there is any objective evidence of impairment. Individually significant assets are reviewed for impairment individually and other assets are reviewed individually or collectively. If any such indication exists, the recoverable amount of the asset or group of assets is estimated and provision is made for the difference between the carrying amount and the recoverable amount. The recoverable amounts of Advances measured at amortised cost are calculated as the present value of the expected future cash flows discounted at the instrument’s original effective interest rate for fixed rate Advances and the current effective interest rate for variable rate Advances. Short term balances are not discounted.

it becoming probable that the borrower will enter bankruptcy or other financial reorganisation, or;the disappearance of an active market for the financial asset because of financial difficulties.

significant financial difficulty of the issuer or obligor, or;a breach of contract, such as a default or delinquency in interest or principal payments, or;the Banking Group, for economic or legal reasons relating to the borrower's financial difficulty, granting to the borrower a concessionthat the lender would not otherwise consider, or;

Objective evidence that a financial asset or portfolio of assets is impaired includes, but is not limited to, observable data that comes to the attention of the Banking Group about the following loss events:

Where the Banking Group expects the carrying amount of assets held within Property, Plant and Equipment to be recovered principally through a sale transaction rather than through continuing use, these assets are classified as Held for Sale.

Assets are reviewed for impairment at least annually and whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount. For revalued assets the write-down is treated in the same way as adjustments arising from revaluations described above. For other assets the impairment loss is recognised as an expense. The recoverable amount is the higher of the asset's fair value less costs to sell and value in use.

Investments in Controlled Entities and Associates are recognised in the Balance Sheet at the lower of cost or recoverable amount.

The cost or revalued amount of Property, Plant and Equipment (excluding Land) less the estimated residual value is depreciated over their useful lives on a straight line basis. The range of useful lives of the major assets are:

Land and Buildings are revalued annually to reflect current market value. The valuations are carried out by independent registered valuers in May of each year. The valuers are all Associate Members of the New Zealand Institute of Valuers and the major valuers are Jones Lang LaSalle Advisory Limited (Auckland), Perry Heavey & Company Limited (Auckland) and Robisons (Whangarei).

Changes in valuations are transferred directly to Asset Revaluation Reserves. Where such a transfer results in a debit balance in the Asset Revaluation Reserve of any individual asset the loss is recognised in the Income Statement, and any subsequent revaluation gains are written back through the Income Statement to the extent of past losses written off.

Property, Plant and Equipment other than Land and Buildings are recognised in the Balance Sheet at cost less Accumulated Depreciation and Impairment Losses.

Financial Assets at Fair Value through Profit or Loss are not assessed for impairment as their fair valuation reflects the credit quality of the instrument, and changes in fair value are recognised in Other Income.

Details of the level of provision for impairment and movements during the accounting period are set out in Note 16.

The assets' residual values, useful lives and depreciation methods are reviewed and adjusted if appropriate at each balance date.

Allowances for credit losses on off balance sheet items such as commitments are reported in Other Liabilities.

Advances to CustomersAdvances are presented net of individually assessed and collective provisions for impairment. Provisions are made against the carrying amount of Advances that are identified as being impaired based on regular reviews of outstanding balances, to reduce these Advances to their recoverable amounts. Collective provisions are maintained to reduce the carrying amount of portfolios of similar Advances to their estimated recoverable amounts as at balance date. These provisions include incurred losses not yet specifically identified in the portfolio. The expected future cash flows for portfolios of similar assets are estimated based on previous experience and considering the credit rating of the underlying customers and late payments of interest or penalties. Increases in the individually assessed and collective provisions are recognised in the Income Statement. When a loan is known to be uncollectible, it is written off against the related provision for loan impairment. Such loans are written off after all the necessary procedures have been completed, and the amount of the loss has been determined.

If in a subsequent period the amount of an impairment loss decreases and the decrease can be linked objectively to an event occurring after the write-off, the write-off or provision is reversed through the Income Statement.

18



(p) Intangible Assets

GOODWILL

COMPUTER SOFTWARE

(q) Taxation

(r) Provisions

(s) Contingent Liabilities and Credit Commitments

(t) Securitisation, Funds under Management and Other Fiduciary Activities

Intangible Assets comprise Goodwill acquired in a business combination, and acquired Computer Software licences as well as certain acquired and internally generated application software.

For the purposes of impairment testing, Goodwill is allocated to cash generating units or groups of units. A cash generating unit is the smallest identifiable group of assets that generate independent cash flows. Goodwill is allocated by the Banking Group to cash generating units or groupsof units based on how Goodwill is monitored by management. Gains and losses on the disposal of an entity include the carrying value of Goodwill relating to the entity sold.

Goodwill, representing the excess of the purchase consideration over the fair value of the identifiable net assets of a controlled entity at the date of gaining control, is capitalised and recognised in the Balance Sheet. Goodwill has an indefinite life.

The carrying value of Goodwill is tested annually for impairment, or more frequently if events or changes in circumstances indicate that it might be impaired. If any such indication exists, the asset's recoverable amount is estimated, and an impairment loss is recognised under Operating Expenses in the Income Statement for the difference between the carrying amount and the recoverable amount. Impairment losses on Goodwill are not reversed.

Securitised assets are derecognised when the right to receive cash flows have expired or the Banking Group has transferred substantially all the risks and rewards of ownership.

In accordance with NZ IAS 12 Income Taxes , a Deferred Taxation Asset is recognised only to the extent that it is probable (i.e. more likely than not) that a future taxable profit will be available against which the asset can be utilised. Deferred Taxation Assets are reduced to the extent that is no longer probable that the related tax benefit will be realised.

A provision is recognised in the Balance Sheet when the Banking Group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and a reliable estimate can be made of the amount of the obligation.

The Banking Group is involved in a range of transactions that give rise to contingent and / or future liabilities. The Banking Group discloses a Contingent Liability when it has a possible obligation arising from past events, that will be confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the Banking Group's control. A Contingent Liability is disclosed when a present obligation is not recognised because it is not probable that an outflow of resources will be required to settle an obligation, or the amount of the obligation cannot be measured with sufficient reliability.

The Banking Group issues commitments to extend credit, letters of credit, guarantees and other credit facilities. These financial instruments attract fees in line with market prices for similar arrangements. They are not sold or traded. The items generally do not involve cash payments other than in the event of default. The fee pricing is set as part of the broader customer credit process and reflects the probability of default. They are disclosed as Contingent Liabilities at their face value. The fair values of guarantees are not considered to be material.

Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at balance date.

Income tax on Net Profit for the year comprises current and deferred tax. Income tax is recognised in the Income Statement except to the extent that it relates to items recognised directly within Equity, in which case it is recognised directly in Equity.

Certain subsidiaries of ASB Bank Limited act as manager for a number of unit trusts and superannuation investment funds.

The assets and liabilities of these trusts and funds are not included in the consolidated financial statements as the Banking Group does not have direct or indirect control of the trusts and funds. Commissions and fees earned in respect of the activities are included in Total Operating Income.

Deferred tax related to fair value re-measurement of Available for Sale Financial Assets, Cash Flow Hedges and the revaluation of Non-current Assets, which are charged or credited directly to Equity, is also credited or charged directly to Equity and is subsequently recognised in the Income Statement if and when the deferred gain or loss on the related asset or liability affects income.

Acquired Computer Software licences are capitalised on the basis of costs incurred to acquire and bring to use the specific software. These costs are amortised over their expected useful lives (three to four years) on a straight line basis.

The Banking Group generally expenses Computer Software costs in the period incurred. However, some costs associated with developing identifiable and unique software products controlled by the Banking Group, including employee costs and an appropriate portion of relevant overheads are capitalised and treated as Intangible Assets. These assets are amortised using the straight line method over their useful lives (not exceeding three years).

Computer Software is subject to the same impairment review process as Property, Plant and Equipment. Any impairment loss is recognised under Operating Expenses in the Income Statement.

Current tax is the expected tax payable on taxable income for the year, using tax rates enacted or substantively enacted as at balance date after taking advantage of all allowable deductions under current taxation legislation and any adjustment to tax payable in respect of previous financial years.

19



(u) Cash Flow Statement

FAIR VALUE ESTIMATES

Due to Other Banks, Money Market Deposits, Deposits from Customers and Other Liabilities

COMPARATIVE DATA

Cash and Cash Equivalents comprises Cash, Cash at Bank, Cash in Transit and Call Deposits Due from / to Other Banks, all of which are used in the day-to-day cash management of the Banking Group and are subject to an insignificant risk of changes in value.

This has been prepared using the direct approach modified by the netting of cash flows associated with Securities, Due from / to Other Banks, Advances and Deposits. This method provides more meaningful disclosure as many cash flows are on behalf of the Banking Group's customers and do not reflect the activities of the Banking Group.

Certain other comparative figures have been reclassified to conform with the current year's presentation.

For financial instruments not presented in the Banking Group's Balance Sheet at their fair value, fair value is estimated as follows:

Cash and Call Deposits with the Central BankThese assets are short term in nature and the related carrying value is equivalent to their fair value.

Due from Other BanksAmounts booked in ASB Bank Limited are carried at fair value. For other Floating Rate Advances, the carrying amount in the Balance Sheet is considered a reasonable estimate of their fair value after making allowances for the fair value of non-accrual and potential problem loans. For other Fixed Rate Advances, fair value is estimated using discounted cash flow models based on the interest rate repricing of the Advances. Discount rates applied in this calculation are based on current market interest rates for Advances with similar credit and maturity profiles.

Advances to CustomersFor Floating Rate Advances, the carrying amount in the Balance Sheet is considered a reasonable estimate of their fair value after making allowances for the fair value of non-accrual and potential problem loans. For Fixed Rate Advances, fair value is estimated using discounted cash flow models based on the interest rate repricing of the Advances. Discount rates applied in this calculation are based on current market interest rates for Advanceswith similar credit and maturity profiles.

For Non-interest Bearing Debt, call and variable rate Deposits, the carrying amounts in the Balance Sheet are a reasonable estimate of their fair valueFor other term Deposits and fixed rate Issued Paper, fair value is estimated using discounted cash flow models based on the maturity of the instruments. The discount rates applied in this calculation are based on current market interest rates for similar instruments with similar maturity profiles. For all Other Liabilities, the carrying amount in the Balance Sheet is a reasonable estimate of their fair value.

For those off balance sheet items such as Direct Credit Substitutes (including acceptance and endorsement of Bills of Exchange), Trade Related Items and Commitments, no secondary market exists and it is therefore not practical to obtain fair values for those instruments. These items have therefore been excluded from fair value calculations.

From 1 May 2009 the organisation design of ASB Bank Limited has been restructured, resulting in changes to internal financial reporting. Business Segments in Note 44 have been updated to reflect the new structure. Comparative data for the year ended 30 June 2008 has been restated on the same basis.

Subordinated DebtWhere there are publicly traded securities of similar maturity, credit and yield characteristics, the estimated fair value of Subordinated Debt is based on quoted market rates. Otherwise, fair value is estimated using discounted cash flow models based on the maturity of the debt.

Off Balance Sheet Items

20



GLOSSARY OF TERMS

Amortised Cost of Financial Asset or Financial Liability

Available for Sale Financial Asset

Cash Flow Hedge

Effective Interest Method

Fair Value

Fair Value Hedge

Financial Instruments at Fair Value through Profit or Loss

Hedge Effectiveness

Hedge Ineffectiveness

Hedged Item

Hedging Instrument

Held to Maturity Investments

Impairment Loss

Loans and Receivables

A designated derivative, the changes in fair value or cash flows of which are expected to offset changes in the fair value or cash flows of a designated hedged item.

Non-derivative financial assets with fixed or determinable payments and a fixed maturity that the Banking Group has a positive intention and ability to hold to maturity. They are measured at amortised cost using the effective interest method.

The amount by which the carrying amount of an asset exceeds its recoverable amount.

Non-derivative financial assets with fixed or determinable payments that are not quoted on an active market are measured at amortised cost using the effective interest method.

The amount at which the financial asset or financial liability is measured at initial recognition minus principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between that initial amount and the maturity amount, and minus any reduction (directly or through the use of an allowance account) for impairment or uncollectibility.

Non-derivative financial assets intended to be held for an indefinite period of time, and which may be sold in response to needs for liquidity or changes in interest rates or exchange rates. They are recognised on acquisition and subsequently at fair value. Changes in the value of Available for Sale Financial Assets are reported in an Available for Sale Reserve, until the assets are sold or otherwise disposed of, or until they are impaired. On disposal the accumulated change in fair value is transferred to the Income Statement and reported under Other Income. Interest, premiums and discounts are amortised through the Income Statement using the effective interest method.

A hedge of the exposure to variability in cash flows that is attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction, and could affect profit or loss.

A method of calculating the amortised cost of a financial asset or financial liability (or group of financial assets or financial liabilities) and of allocating the Interest Income or Interest Expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or, when appropriate, a shorter period to the net carrying amount of the financial asset or financial liability. When calculating the effective interest rate, the Banking Group estimates cash flows considering all contractual terms of the financial instrument, but does not consider future credit losses. The calculation includes all fees paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums or discounts. The interest income or expense is allocated through the life of the instrument and is measured for inclusion in the Income Statement by applying the effective interest rate to its amortised cost.

The degree to which changes in the fair value or cash flows of the hedged items that are attributable to the hedged risk are offset by changes in the fair value or cash flows of the hedging instrument.

The amount by which changes in the cash flow of the hedging derivative differ from changes in the cash flow of the hedged item, or the amount by which the changes in the fair value of the hedging derivative differ from changes in the fair value of the hedged item. Such gains and losses are recorded in current period earnings.

An asset, liability, firm commitment or highly probable forecast transaction that exposes the Banking Group to risk of changes in fair value or cash flows, and that is designated as being hedged.

The amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's length transaction.

A hedge of the exposure to changes in fair value of a recognised asset or liability or an unrecognised firm commitment, or an identified portion of such an asset, liability or firm commitment, that is attributable to a particular risk and could affect profit or loss.

All financial assets and financial liabilities held for trading and any financial asset or financial liability that on initial recognition is designated by the Banking Group as at Fair Value through Profit or Loss. Assets and Liabilities in this category are measured at fair value. Gains or losses arising from changes in fair value are recognised in Other Income.

21


$ millionsFor the year ended 30 June 2009 2008 2009 2008

2 Interest Income

Central Bank Deposits 106 138 - - Advances at Fair Value through Profit or Loss 64 327 - - Securities 317 334 23 28Due from Other Banks at Amortised Cost - - 222 315Advances to Customers 4,678 4,344 418 538Other - 4 - - Total Interest Income 5,165 5,147 663 881

3 Interest Expense

Deposits at Fair Value through Profit or LossCertificates of Deposit 167 207 - - Issued Paper 422 304 - - Term Deposits 29 16 - - Deposits Bearing Interest (on Demand and Short Term) 74 112 - -

692 639 - -

Derivative Instruments not in Hedge Relationships 541 662 28 127

Deposits at Amortised CostCertificates of Deposit 32 - - - Due to Other Banks 551 665 305 389Issued Paper 72 133 - - Term Deposits from Customers 1,275 1,099 28 28Other Interest Bearing Deposits from Customers 686 610 102 112

2,616 2,507 435 529

Subordinated Debt 301 319 160 193Other - 1 - -

Total Interest Expense 4,150 4,128 623 849

4 Discontinued Activities

5 Other Income

Services and Commission IncomeLending and Credit Facility Related Fee Income 333 185 35 19Other Fees Received 214 164 - - Total Services and Commission Income 547 349 35 19

Services and Commission ExpenseLending and Credit Facility Related Fee Expense (44) (41) - - Other Fees Paid (12) (6) - - Total Services and Commission Expense (56) (47) - -

Net Foreign Exchange Earnings and Commissions 51 46 - -

Net Foreign Exchange Translation Gain / (Loss) on Financial Instruments not measured at Fair Value 658 (1,156) 658 (1,156)

Net Fair Value Gain / (Loss) from:Trading Securities 49 3 - - Derivatives Transacted as Hedges but not Qualifying for (130) (82) 10 (2)

Hedge AccountingOther Derivatives 1,704 2,021 (658) 1,156Financial Assets Designated as at Fair Value through Profit or Loss 298 193 - - Financial Liabilities Designated as at Fair Value through Profit or Loss (2,619) (1,022) - - Available for Sale Financial Assets - 45 - - Total Net Fair Value (Loss) / Gain (698) 1,158 (648) 1,154

Ineffective Portion of Hedges:Fair Value Hedge Ineffectiveness:

Loss on Hedged Items (235) (120) (142) (123)Gain on Hedging Instruments 231 112 142 123

Cash Flow Hedge Ineffectiveness 13 (11) - (2)Total Ineffective Portion of Hedges 9 (19) - (2)

There were no discontinued activities during the year ended 30 June 2009 (30 June 2008 Nil).


Interest Income on Advances to Customers for the year ended 30 June 2009 included interest earned of $20.6m on Impaired Assets and $0.5m on Restructured Assets for the Banking Group and Nil for the Registered Bank (30 June 2008 $3m and Nil respectively for the Banking Group and the Registered Bank).

22


$ millionsFor the year ended 30 June 2009 2008 2009 2008

5 Other Income (continued)

Other Operating IncomeNet Loss on Disposal of Property, Plant and Equipment (2) (1) - - Dividends Received from Controlled Entities and Associates 1 1 - - Other Dividends Received 1 2 - - Other (2) (2) - - Total Other Operating Income (2) - - - Total Other Income 509 331 45 15

6 Operating Expense Disclosures

DepreciationBuildings 10 9 - - Furniture and Fittings 6 6 - - Computer and Office Equipment and Operating Software 19 20 - - Total Depreciation 35 35 - -

Operating Lease Rentals 47 42 - -

Amortisation of Intangible Assets 23 13 - -

7 Auditor's Remuneration

8 Taxation

Current Taxation 267 284 19 12Deferred Taxation (refer to Note 21) (66) (66) (15) -

Total Income Tax Charged to the Income Statement 201 218 4 12

Net Profit before Taxation 580 708 11 34

Tax at the Domestic Rate of 30% (33% in Comparative Periods) 174 234 4 12

Tax Effect of Income not Subject to Taxation (41) (61) - - Tax Effect of Expenses not Deductible for Taxation Purposes 28 30 - - Tax Effect of Imputation Credit adjustments (2) (10) - - Tax Effect of Prior Period Adjustments 42 23 - - Tax Effect of Change to Domestic Rate - 2 - -

Taxation Expense 201 218 4 12

Weighted Average Applicable Tax Rate 34.5% 30.8% 32.4% 34.4%

9 Dividends

Ordinary Dividends - 512 - - Redeemable Preference Dividends 57 57 - - Total Dividends 57 569 - -

For the year ended 30 June 2009, no dividends on Ordinary Shares were paid by members of the Banking Group (30 June 2008 $510m paid by ASB Holdings Limited, being $0.98 per share and $1.4m paid by CBA Funding (NZ) Limited, being $2.49 per share.)

For the year ended 30 June 2009 dividends on Redeemable Preference Shares were $57m (8.16 cents per share) paid by CBA Funding (NZ) Limited (30 June 2008 $57m paid by CBA Funding (NZ) Limited being 8.16 cents per share).

In May 2007 legislation was passed to reduce the New Zealand corporate tax rate from 33% to 30%, effective for the 2009 income tax year. The tax effect shown is the impact on the value of Deferred Tax as a result of the reduction in the corporate tax rate from 1 July 2008 (refer to Note 21).


The Taxation Expense on the Banking Group's Net Profit before Taxation differs from the theoretical amount that would arise using the domestic tax rate as follows:

Audit fees of $1,789,000 for the Banking Group and $129,000 for the Registered Bank were paid to PricewaterhouseCoopers during the year ended 30 June 2009 (30 June 2008 $1,391,000 and $145,000).

PricewaterhouseCoopers is the appointed auditor of the Banking Group.

Fees for Other Services of $1,072,000 for the Banking Group and Nil for the Registered Bank were paid to PricewaterhouseCoopers during the year ended 30 June 2009 (30 June 2008 $643,000 and $9,000).

23


$ millionsAs at 30 June 2009 2008 2009 2008

10 Cash and Call Deposits with the Central Bank

Cash and Cash at Bank 108 66 44 59Cash in Transit 35 (1) - - Cash and Call Deposits with the Central Bank 1,439 1,090 - - Total Cash and Call Deposits with the Central Bank 1,582 1,155 44 59

11 Due from Other Banks

Call 1,153 43 - 9Term 105 594 3,250 3,729Total Due from Other Banks 1,258 637 3,250 3,738

Amounts Due from Other Banks are measured as follows:(a) At Fair Value through Profit or Loss

Call 1,153 43 - - Term 2 557 - - Total at Fair Value through Profit or Loss 1,155 600 - -

(b) At Amortised CostCall - - - 9Term 103 37 3,250 3,729Total at Amortised Cost 103 37 3,250 3,738

Other Government Securities accepted 2 247 - - Other Securities accepted - 433 - -

No securities have been repledged as at 30 June 2009 (30 June 2008 Nil).

12 Money Market Advances

Call 86 51 - - Term 73 1,172 - - Total Money Market Advances 159 1,223 - -

13 Securities

Trading SecuritiesLocal Authority Securities 87 84 - - New Zealand Government Securities 509 64 - - Treasury Bills 2,426 738 597 440Bank Bills 1,918 1,800 - - Other 1,116 921 - -

6,056 3,607 597 440Other Securities Designated as at Fair Value through Profit or LossDebt Securities 685 1,741 - - Equity Securities - 18 - -

685 1,759 - - Total Securities at Fair Value through Profit or Loss 6,741 5,366 597 440

Securities Designated as Available for SaleEquity Securities 32 36 - -

6,773 5,402 597 440

Fair Value of Securities pledged under repurchase agreements or other arrangements:New Zealand Government Securities - 10 - -


Fair Value of collateral accepted for Loans to Other Banks, which the Banking Group is permitted to sell or repledge:

The Banking Group has not reclassified any amounts Due from Other Banks as measured at amortised cost rather than fair value during the year ended 30 June 2009 (30 June 2008 Nil).

No securities have been repledged as at 30 June 2009 (30 June 2008 Nil).

ASB Bank Limited has entered into Credit Support Annexes ("CSA") in respect of certain credit exposures relating to derivative transactions. As at 30 June 2009 $1,124m included in Due from Other Banks at Call was advanced as collateral to offset Derivative Liabilities (30 June 2008 Nil).

The Banking Group has not reclassified any Securities as measured at amortised cost rather than fair value or as measured at fair value rather than amortised cost during the year ended 30 June 2009 (30 June 2008 Nil).

For the year ended 30 June 2009 no loss was attributable to changes in credit risk for Money Market Advances designated at Fair Value through Profit or Loss (30 June 2008 $2m). The maximum exposure to credit risk for Advances at Fair Value through Profit or Loss is represented by their carrying values.

Total Securities

ASB Bank Limited has entered into CSA's in respect of certain credit exposures relating to derivative transactions. As at 30 June 2009 $46m included in Money Market Advances at Call was advanced as collateral to offset Derivative Liabilities (30 June 2008 Nil).

No collateral has been accepted for Money Market Advances (30 June 2008 Nil).

24


14 Derivative Financial Instruments

HEDGE ACCOUNTING

Cash Flow Hedges

Fair Value Hedges

Net Investment Hedges

Notional Notional$ millions Amount Assets Liabilities Amount Assets Liabilities

As at 30 June 2009

AT FAIR VALUE THROUGH PROFIT OR LOSS

Exchange Rate ContractsForward Contracts 12,501 104 (688) - - - Swaps 10,564 121 (314) 2,293 80 - Options 75 2 (1) - - - Total Exchange Rate Contracts 23,140 227 (1,003) 2,293 80 -

Interest Rate ContractsForward Contracts 5,604 2 (1) - - - Swaps 78,055 1,751 (2,054) - - - Futures 14,304 1 (2) - - - Options 988 5 (5) - - - Total Interest Rate Contracts 98,951 1,759 (2,062) - - -

Commodity ContractsForward Contracts 10 - - - - -

Total at Fair Value through Profit or Loss 122,101 1,986 (3,065) 2,293 80 -

DESIGNATED AS CASH FLOW HEDGES

Exchange Rate ContractsSwaps 2,230 - (169) 844 - (117)

Interest Rate ContractsSwaps 25,128 195 (907) - - -

Total Designated as Cash Flow Hedges 27,358 195 (1,076) 844 - (117)

DESIGNATED AS FAIR VALUE HEDGES

Exchange Rate ContractsSwaps 1,074 - (29) 1,074 - (29)

Interest Rate ContractsSwaps 4,762 336 (69) 2,002 228 (5)

Total Designated as Fair Value Hedges 5,836 336 (98) 3,076 228 (34)Total Recognised Derivative Assets / (Liabilities) 155,295 2,517 (4,239) 6,213 308 (151)

Fair Value Fair ValueBanking Group Registered Bank

Fair valuation gains and losses deferred in Cash Flow Hedge Reserves will be transferred to Profit or Loss over the next one to five years, as the cash flows under the hedged transactions occur.

The Banking Group previously hedged its net investment in a foreign subsidiary with foreign currency borrowings. Refer to Note 31 for further details.

Derivatives not qualifying for hedge accounting treatment are classified as at Fair Value through Profit or Loss. Refer to Note 1(g) and (h) for an explanation of the Banking Group's accounting policies for Derivatives.

ASB Bank Limited has entered into CSA in respect of certain derivative counterparties. These CSA’s compel ASB Bank Limited or the Counterparty to collateralise the market value of outstanding derivative transactions. As at 30 June 2009 ASB Bank Limited had placed $1,170m of cash collateral against Derivative Liabilities and taken $24m of collateral against Derivative Assets (30 June 2008 Nil).

The Banking Group hedges the forecasted interest cash flows from floating rate deposits and the roll-over of short term fixed rate funding arrangements using Cross Currency and Interest Rate Swaps. As at 30 June 2009 there were no transactions where cash flow hedge accounting ceased during the year as a result of highly probable cash flows no longer expected to occur (30 June 2008 Nil).

ASB Bank Limited uses Interest Rate Swaps to hedge the interest rate risk exposure of a portion of its portfolio of fixed rate mortgage loans. Interest Rate and Cross Currency Swaps have also been used to hedge certain fixed rate funding arrangements, included in Money Market Deposits and Subordinated Debt.

25


14 Derivative Financial Instruments (continued)

Notional Notional$ millions Amount Assets Liabilities Amount Assets Liabilities

As at 30 June 2008

AT FAIR VALUE THROUGH PROFIT OR LOSS

Exchange Rate ContractsForward Contracts 13,436 224 (34) - - - Swaps 11,585 344 (301) 2,192 100 (235)Options 51 - - - - - Total Exchange Rate Contracts 25,072 568 (335) 2,192 100 (235)

Interest Rate ContractsForward Contracts 16,012 2 (2) - - - Swaps 49,856 332 (375) - - - Futures 8,883 2 (2) - - - Options 3,435 2 (2) - - - Total Interest Rate Contracts 78,186 338 (381) - - -

Equity ContractsOptions 47 9 (4) - - -

Commodity ContractsForward Contracts 3 - - - - -

Total at Fair Value through Profit or Loss 103,308 915 (720) 2,192 100 (235)

DESIGNATED AS CASH FLOW HEDGES

Exchange Rate ContractsSwaps 3,216 118 (15) 1,667 88 (13)

Interest Rate ContractsSwaps 28,243 126 (234) 284 - (4)

Total Designated as Cash Flow Hedges 31,459 244 (249) 1,951 88 (17)

DESIGNATED AS FAIR VALUE HEDGES

Exchange Rate ContractsSwaps 917 - (197) 917 - (197)

Interest Rate ContractsSwaps 4,895 90 (27) 1,694 80 (1)

Total Designated as Fair Value Hedges 5,812 90 (224) 2,611 80 (198)

Total Recognised Derivative Assets / (Liabilities) 140,579 1,249 (1,193) 6,754 268 (450)

Banking Group Registered Bank Fair Value Fair Value

26



15 Advances to Customers

Loans and Other Receivables 59,114 55,891 5,706 6,542Fair Value Hedge Adjustments 55 4 4 1Provisions for Impairment (323) (122) (62) (13)Total Advances to Customers 58,846 55,773 5,648 6,530

Advances to Customers include Finance Lease Receivables as follows:

Gross Investment in Finance Lease ReceivablesNo later than 1 year 47 115 9 8Later than 1 year and no later than 5 years 160 170 22 12Later than 5 years 355 363 1 2

562 648 32 22Less Unearned Future Finance Income 79 160 5 4Net Investment in Finance Leases 483 488 27 18

The Net Investment in Finance Leases may be analysed as follows :No later than 1 year 33 91 7 6Later than 1 year and no later than 5 years 116 89 19 10Later than 5 years 334 308 1 2Net Investment in Finance Leases 483 488 27 18

16 Credit Risk Management and Asset Quality

The Expected Loss ("EL") is the product of the PD, EAD and the LGD. An EL will be recorded for every facility including those that are retail.

Credit Risk Measurement

The measurement of credit risk utilises analytical tools to calculate both expected and unexpected loss possibilities for the credit portfolio. This includes consideration of the probability of default ("PD"), the exposure at the time of default ("EAD") and the loss given default ("LGD") that would likely be experienced as a consequence.

The PD is the estimate of the probability that a client will default within the next 12 months. It reflects a client's ability to generate sufficient cash flows into the future to meet the terms of all its credit contracts with the Banking Group.

As at 30 June 2009 the Banking Group had undertaken repurchase agreements of $200m with the RBNZ, with underlying RMBS of $245m provided as collateral under this arrangement.

ASB Bank Limited and the Registered Bank have comprehensive, clearly defined credit policies for the approval and management of all credit risk including risk to other bank and related counterparties. Lending standards and criteria are clearly defined into different business sectors for all ASB Bank Limited and Registered Bank products and incorporate income/repayment capacity, acceptable terms and security and loan documentation tests.

EAD is the proportion of a facility that may be outstanding in the event of default. It is expressed as a percentage of the facility limit.

LGD is the proportion of a facility estimated likely to be lost in the event of default. It is expressed as a percentage. LGD is impacted by the type and level of any collateral held.

While ASB Bank Limited and the Registered Bank apply policies, standards and procedures in governing the credit process, the management of credit risk also relies on the application of judgement and the exercise of good faith and due care of relevant staff within their delegated authority.

During the year ended 30 June 2009 ASB Bank Limited established an in house residential mortgage backed securities ("RMBS") facility, which can issue securities that are acceptable as collateral for borrowing from the Reserve Bank of New Zealand ("RBNZ"). As at 30 June 2009 housing loans to the value of $4.1b had been internally securitised through the Medallion NZ Series Trust 2009-1R. The securitised assets remain on the Banking Group's Balance Sheet and are included in Advances to Customers, as ASB Bank Limited retains a continuing involvement in the transferred assets (funding, liquidity and credit risk remains with ASB Bank Limited).

The respective Board Audit and Risk Committees of ASB Bank Limited and CBA operate under charters by which they oversee credit management policies and practices. The Committees ensure that credit policies and portfolio standards designed to achieve portfolio outcomes consistent with the risk / return expectations of ASB Bank Limited and the Registered Bank respectively, are in place and maintained. In addition, the Committees review and adjust where appropriate the risk appetite of ASB Bank Limited and the Registered Bank. The Committees also approve large individually significant provisions or write offs, and impairment provisioning amounts each half year.

A system of industry limits and a large credit exposure policy assist in the diversification of the credit portfolio. These policies are an important part of portfolio management objectives to create a diversified portfolio avoiding significantly large concentrations of economically related credit risk exposures.


Credit risk is the potential risk for loss arising from failure of a debtor or counterparty to meet their contractual obligations.

Credit risk principally arises within the Banking Group from its core business in providing lending facilities. Credit risk also arises from the Banking Group assuming contingent liabilities, taking equity participations, participating in financial market transactions and assuming underwriting commitments. The Banking Group is selective in targeting credit risk exposures and avoids exposures to any high risk area.

In June 2007 the Banking Group also entered into a 9 year leasing arrangement of a ferry. The lessee has provided an indemnity covering any loss the Banking Group may bear upon the sale of the ferry at the end of the lease term.

In May 2007 the Banking Group entered into a 10 year finance leasing arrangement with an airline over two 747-400 freighter aircraft. Under this arrangement the lessee bears the risk associated with changes in the fair value of the aircraft.

Credit Risk Management

27


16 Credit Risk Management and Asset Quality (continued)

1.2.3.4.5.6.

Overall Credit Grade Retail Grade Corporate Grade Banking Group Rating Classification

Low EL Pool 1 CRR* 1 - 3 Corporate facilities demonstrating financial condition and capacity to repay that are good to exceptional. Retail facilities with low expected loss.

Moderate EL Pool 2 CRR 4 - 6 Corporate facilities demonstrating financial condition and capacity to repay that are acceptable to good. Retail facilitieswith moderate expected loss.

High EL Pool 3 CRR 7 - 9 Corporate facilities that require varying degrees of special attention (not necessarily contractually past due). Retail facilities operating outside of agreed arrangements.

RBNZ Classification Retail Grade Corporate Grade Banking Rating Classification

Pass Grades Pool 1 - 2 CRR 1 - 6 Pass Grades

Special Mention Past Due CRR 7 Troublesome

Substandard Past Due CRR 8 Troublesome

Doubtful / Non-accrual Default CRR 9 Impaired / Loss

*Credit Risk Rating ("CRR")

1.

2.

ASB Bank Limited and the Registered Bank assess the integrity and ability of debtors or counterparties to meet their contracted financial obligations forepayment. Collateral security in the form of real property or a security interest in personal property is generally taken for business credit except for major government, bank and corporate counterparties of strong financial standing. Longer term consumer finance (e.g. housing loans), is generally secured against real estate while short term revolving consumer credit is generally unsecured.

Collateral Security

a floating charge over a company's assets, including stock and receivables; anda charge over stock or scrip.

Credit risk is divided into the Retail segment and the Corporate segment. A different approach is used in each to determine an overall credit grade based on EL. These ratings equate to each other as follows:

PD and LGD are determined using individual assessment tools. The CRR is determined by reference to a matrix where PD and LGD combine to produce a numeric CRR grade which represents a range of EL.

Main collateral types include:

charge over properties being financed;

Troublesome and Impaired Assets ("TIAs") – CRR of 7 - 9. These credit facilities are not eligible for increases in exposure unless it will protect or improve the Banking Group’s position by maximising recovery prospects or to facilitate rehabilitation.

CRRs fall into two categories:

The Retail segment comprises housing loans, credit cards, other personal credit facilities and most secured business lending up to $1m. These portfolios are managed using statistical origination and account management techniques.

Retail

The Corporate segment is subject to inspection by the Risk Asset Review unit, which is independent of the originating business units and which reportson its findings to the Board Risk Committee. Credit processes, including compliance with policy and portfolio standards, and application of risk ratings, are examined, and reported where cases of non-compliance are observed.

Retail facilities are assigned to a PD, EAD and LGD pool based on observed and predicted outcomes for facilities with similar characteristics. The overall credit grading pool is based on the EL that results from the product of PD, EAD and LGD for each facility.

Facilities in the Retail segment become classified for remedial management by centralised units based on delinquency status.

Retail origination processes are reviewed by the relevant Quality Assurance unit. Credit process overview is provided by the independent Risk Asset Review unit.

Corporate

Corporate exposures comprise commercial exposures, including bank and government exposures. A Credit Risk Rating ("CRR") is recorded against every corporate facility. Credit risk rated exposures are reviewed at least annually and the CRR reassessed.

Pass – CRR of 1 - 6. These credit facilities qualify for approval of new or increased exposure on normal commercial terms.

Asset Quality

ASB Bank Limited and the Registered Bank have policies and procedures in place setting out the circumstance where acceptable and appropriate collateral is to be taken, including valuation parameters, review frequency and independence of valuation.

residential mortgages;

cash (usually in the form of a charge over a Term Deposit);guarantees by company directors supporting commercial lending;

These ratings equate to the rating classifications of the RBNZ as follows:

28



>

>

>

>

>

Impairment and Provisioning of Financial Assets

A credit obligation is sold at a material credit related economic loss.

Default is defined as any one of the following:

A contractual payment is overdue by more than 90 days.

An approved overdraft limit has been exceeded for more than 90 days.

The provisions for impairment take into account current cyclical developments as well as economic conditions in which the borrowers operate and are subject to management review, experienced judgement, and adjustment where necessary to reflect these and other relevant factors in individual portfolios.

ASB Bank Limited or the Registered Bank become aware that the client will not be able to meet future repayments or service alternative acceptable repayment arrangements e.g. the client has been declared bankrupt.

ASB Bank Limited or the Registered Bank have determined that full recovery of both principal and interest is unlikely. This may be the case even if all the terms of the client's credit facilities are currently being met.

Impairment losses are recognised to reduce the carrying amount of loans and advances to their estimated recoverable amounts. Individually assessed provisions are made against individually significant financial assets when there is objective evidence that either ASB Bank Limited or the Registered Bank will not be able to collect all amounts due. The amount of the impairment/loss is the difference between the carrying amount and the recoverable amount, calculated as the present value of expected cash flows, including amounts recoverable from guarantees and collateral (and cost of recovery), discounted at the original effective interest rate. Interest continues to be accrued on impaired loans based on the revised carrying amounts and using appropriate effective interest rates.

Corporate portfolios are assessed for objective evidence that the financial asset or portfolio of assets is impaired. Impaired assets in the Corporate segment include those facilities where an individually assessed provision for impairment has been raised, the facility is maintained on a cash basis, a loss of principal or interest is anticipated, facilities have been restructured or other assets have been accepted in satisfaction of an outstanding debt.

ASB Bank Limited and the Registered Bank recognise collective provisions for impairment where there is objective evidence that components of a loan portfolio with similar credit risk characteristics contain probable losses at the balance sheet date that will be individually identified in the future, or where insufficient data exists to reliably determine whether such losses exist. The estimated probable losses are based upon historical patterns of losses. The calculations are based on statistical methods of credit risk measurement.

Provisions for impairment are raised where there is objective evidence of impairment and at an amount adequate to cover estimated credit related losses. Credit losses arise primarily from loans but also from other credit instruments such as Bank acceptances, contingent liabilities, guarantees andother financial instruments and assets acquired through security enforcement.

In addition to the credit risk management processes used to manage exposures to credit risk in the credit portfolio, the internal ratings process also assists management in assessing the requirements of NZ IAS 39 relating to impairment and provisioning of financial assets.

29


Registered Bank

$ millionsResidential

Mortgages (1) Other Retail Corporate Total Corporate (2)


(a) Credit Quality Information for Advances to Customers

As at 30 June 2009

Gross Advances to Customers by Credit QualityNeither Past Due Nor Impaired 34,120 3,681 17,436 55,237 5,638Past Due 2,745 366 346 3,457 - Impaired 86 8 326 420 68Total Gross Advances to Customers by Credit Quality 36,951 4,055 18,108 59,114 5,706

(1) The Residential Mortgages asset class consists of mortgages which are secured by residential properties.(2) Total Gross Advances to Customers for the Registered Bank comprises Corporate customers only.

Neither Past Due Nor Impaired

Low Expected Loss 33,780 474 9,620 43,874 4,460Medium Expected Loss 340 3,186 6,847 10,373 1,115High Expected Loss - 21 969 990 63Total Advances Neither Past Due Nor Impaired 34,120 3,681 17,436 55,237 5,638

Aging Analysis of Past Due AssetsLess than 30 days 1,948 265 280 2,493 - 30 to 59 days 351 35 23 409 - 60 to 89 days 150 20 11 181 - Over 90 days 296 46 32 374 - Total Past Due Assets 2,745 366 346 3,457 -

90-day Past Due AssetsBalance at Beginning of Year 92 22 30 144 - Additions 247 31 8 286 - Less: Amounts Written Off 43 7 6 56 - Balance at End of Year 296 46 32 374 -

IMPAIRED ASSETS

Restructured AssetsBalance at Beginning of Year - - - - - Additions 65 - - 65 - Balance at End of Year 65 - - 65 -

Other Individually Impaired AssetsBalance at Beginning of Year 8 1 21 30 - Additions 22 10 345 377 86Less: Amounts Written Off 9 3 40 52 18Gross Advances Individually Determined to be Impaired 21 8 326 355 68Less: Individually Assessed Provisions 7 1 116 124 41Net Advances Individually Determined to be Impaired 14 7 210 231 27

Total Impaired Assets 86 8 326 420 68

Other Assets Under AdministrationBalance at Beginning of Year 9 1 5 15 - Additions 9 5 5 19 - Balance at End of Year 18 6 10 34 -

Undrawn balances on lending commitments to counterparties within the Impaired Asset category were $8m for Banking Group and Nil for Registered Bank as at 30 June 2009 (30 June 2008 $1m and Nil).

The facilities that are reported as impaired and past due are collateralised in terms of Banking Group policy. For further details refer to the Credit Risk Management and Asset Quality policies.

Banking Group

The credit quality of advances that were neither past due nor impaired can be assessed by reference to the Banking Group's internal rating system :

There were no Undrawn balances on lending commitments to counterparties within the 90-day Past Due Asset category as at 30 June 2009 (30 June 2008 Nil) for both Banking Group and Registered Bank.

30


Registered Bank

$ millionsResidential

Mortgages (1) Other Retail Corporate Total Corporate (2)


(a) Credit Quality Information for Advances to Customers (continued)

As at 30 June 2009 (continued)

As at 30 June 2008

Gross Advances to Customers by Credit QualityNeither Past Due Nor Impaired 33,183 3,556 15,971 52,710 6,502Past Due 2,317 370 464 3,151 40Impaired 8 1 21 30 - Total Gross Advances to Customers by Credit Quality 35,508 3,927 16,456 55,891 6,542

(1) The Residential Mortgages asset class consists of mortgages which are secured by residential properties.(2) Total Gross Advances to Customers for the Registered Bank comprises Corporate customers only.

Neither Past Due Nor Impaired

Low Exposure Loss 33,015 1,770 10,558 45,343 5,784Medium Exposure Loss 168 1,781 5,253 7,202 659High Exposure Loss - 5 160 165 59Total Advances Neither Past Due Nor Impaired 33,183 3,556 15,971 52,710 6,502

Aging Analysis of Past Due AssetsLess than 30 days 1,886 272 335 2,493 - 30 to 59 days 252 56 77 385 4060 to 89 days 87 20 22 129 - Over 90 days 92 22 30 144 - Total Past Due Assets 2,317 370 464 3,151 40

90-day Past Due AssetsBalance at Beginning of Year 47 19 20 86 - Additions 55 5 13 73 - Less: Amounts Written Off 10 2 3 15 - Balance at End of Year 92 22 30 144 -

IMPAIRED ASSETS

Other Individually Impaired AssetsBalance at Beginning of Year 1 2 7 10 - Additions 7 - 24 31 - Less: Amounts Written Off - 1 10 11 - Gross Advances Individually Determined to be Impaired 8 1 21 30 - Less: Individually Assessed Provisions 5 1 16 22 - Net Advances Individually Determined to be Impaired 3 - 5 8 -

Other Assets Under AdministrationBalance at Beginning of Year 7 2 - 9 - Additions / (Deletions) 2 (1) 5 6 - Balance at End of Year 9 1 5 15 - -

The credit quality of advances that were neither past due nor impaired can be assessed by reference to the Banking Group's internal rating system:

As at 30 June 2008, neither the Banking Group nor the Registered Bank had any Restructured Assets

Banking Group

Undrawn balances on lending commitments to counterparties within the Other Assets Under Administration category were $2m for Banking Group and Nil for Registered Bank as at 30 June 2009 (30 June 2008 $1m for Banking Group and Nil for Registered Bank).

As at 30 June 2009 neither the Banking Group nor the Registered Bank had any restructured assets or financial assets, real estate assets or other assets acquired through enforcement of security (30 June 2008 Nil).

31

Notes to the Financial Statements

Registered Bank

$ millionsResidential Mortgages Other Retail Corporate Total Corporate


(b) Provisions for Impairment Loss

As at 30 June 2009

Collective ProvisionBalance at Beginning of Year 16 30 54 100 13Charged to Income Statement 22 37 40 99 8Balance at End of Year 38 67 94 199 21

Individually Assessed ProvisionsBalance at Beginning of Year 5 1 16 22 - Add / (Less):Charged to Income Statement:

New Provisions 11 4 151 166 59Amounts Recovered - (1) (11) (12) -

Write Offs Against Individually Assessed Provisions (9) (3) (40) (52) (18)Balance at End of Year 7 1 116 124 41Total Provisions for Impairment Loss 45 68 210 323 62

Movement in Collective Provision 22 37 40 99 8Movement in Individually Assessed Provisions 11 3 140 154 59Bad Debts Written Off 43 7 6 56 - Bad Debts Recovered (2) (1) (1) (4) -

74 46 185 305 67

As at 30 June 2008

Collective ProvisionBalance at Beginning of Year 5 38 47 90 6Charged to Income Statement 11 (8) 7 10 7Balance at End of Year 16 30 54 100 13

Individually Assessed ProvisionsBalance at Beginning of Year 1 1 5 7 - Add / (Less):Charged to Income Statement:

New Provisions 5 1 23 29 - Amounts Recovered (1) - (2) (3) -

Write Offs Against Individually Assessed Provisions - (1) (10) (11) - Balance at End of Year 5 1 16 22 - Total Provisions for Impairment Loss 21 31 70 122 13

Impairment Losses Charged to the Income StatementMovement in Collective Provision 11 (8) 7 10 7Movement in Individually Assessed Provisions 4 1 21 26 - Bad Debts Written Off 10 2 3 15 - Bad Debts Recovered (2) (1) (1) (4) -

23 (6) 30 47 7Total Impairment Losses Charged to the Income Statement

For the year ended 30 June 2009

Banking Group

Impairment Losses Charged to the Income Statement

Total Impairment Losses Charged to the Income Statement

32



(c) Concentrations of Credit Exposures

Financial Financial Financial FinancialAssets at Assets at Other Total Assets at Assets at Other Total

Amortised Fair Credit Credit Amortised Fair Credit Credit$ millions Cost Value Exposures Exposures Cost Value Exposures Exposures

As at 30 June 2009

Agricultural, Forestry and Fishing 6,744 96 885 7,725 211 - 321 532Government and Public Authorities 698 2,383 433 3,514 230 597 201 1,028Financial, Investments and Insurance 15,726 7,958 1,962 25,646 5,669 308 747 6,724Utilities 672 16 844 1,532 606 - 838 1,444Transport and Storage 1,475 38 183 1,696 859 - 154 1,013Housing (1) 30,325 - 4,042 34,367 - - - - Construction 325 1 111 437 - - 32 32Personal 966 - 1,573 2,539 - - - - Other Commercial and Industrial 3,600 112 1,444 5,156 1,367 - 953 2,320

60,531 10,604 11,477 82,612 8,942 905 3,246 13,093

Auckland 37,073 226 7,293 44,592 7,217 - 2,040 9,257Rest of New Zealand 23,351 5,350 4,181 32,882 1,622 597 1,206 3,425Overseas 107 5,028 3 5,138 103 308 - 411

60,531 10,604 11,477 82,612 8,942 905 3,246 13,093

The following table presents the maximum exposure to credit risk of financial assets and other credit exposures, before taking account of any collateraheld or other credit enhancements unless such credit enhancements meet the offsetting criteria in NZ IAS 32 Financial Instruments: Presentation.

For financial assets recognised on the Balance Sheet, the maximum exposure to credit risk equals their carrying values. Other Credit Exposures include irrevocable Lending Commitments, Guarantees, Standby Letters of Credit and other off balance sheet Credit Commitments. The maximum exposure to credit risk for Guarantees and Standby Letters of Credit is the maximum amount that the Banking Group would have to pay if the facilities were called upon. For irrevocable Lending Commitments and other Credit Commitments, the maximum exposure to credit risk is the full amount of the committed facilities.

Total Credit Exposures by Geographic Region

Total Credit Exposures by Industry

Concentration by Industry

Concentration by Geographic Region

Taxation Assets, Property, Plant and Equipment, Intangible Assets and Other Assets have been excluded from the analysis below, on the basis that any credit exposure is insignificant or Nil.

Australian and New Zealand Standard Industrial Classification ("ANZSIC") codes have been used as the basis for disclosing customer industry sectors.


(1) The Housing sector for Financial Assets at Amortised Cost includes advances which are used for the purchase of residential properties that are owner-occupied. Advances which are used for the purchase of investment properties are included in the Financial, Investments and Insurance sector under Financial Assets at Amortised cost.

33



(c) Concentrations of Credit Exposures (continued)

Financial Financial Financial FinancialAssets at Assets at Other Total Assets at Assets at Other Total

Amortised Fair Credit Credit Amortised Fair Credit Credit$ millions Cost Value Exposures Exposures Cost Value Exposures Exposures

As at 30 June 2008

Agricultural, Forestry and Fishing 6,093 61 723 6,877 249 - 20 269Government and Public Authorities 249 2,760 488 3,497 120 440 224 784Financial, Investments and Insurance 14,890 5,053 2,058 22,001 7,221 268 699 8,188Utilities 743 76 516 1,335 698 - 508 1,206Transport and Storage 1,393 84 216 1,693 837 - 172 1,009Housing (1) 29,394 - 4,142 33,536 - - - - Construction 431 56 141 628 27 - 29 56Personal 613 - 1,174 1,787 8 - - 8Other Commercial and Industrial 3,159 384 1,556 5,099 1,167 - 745 1,912

56,965 8,474 11,014 76,453 10,327 708 2,397 13,432

Auckland 34,365 1,493 6,992 42,850 9,077 - 1,524 10,601Rest of New Zealand 22,203 2,557 3,973 28,733 1,215 440 873 2,528Overseas 397 4,424 49 4,870 35 268 - 303

56,965 8,474 11,014 76,453 10,327 708 2,397 13,432

(d) Concentrations of Credit Exposures to Individual Counterparties

There are no credit exposures to individual counterparties greater than 10% of Commonwealth Bank of Australia's 30 June 2009 equity (30 June 2008 Nil).


Total Credit Exposures by Geographic Region

Total Credit Exposures by Industry



34


17 Controlled Entities and Associates

% Nature of Business

SubsidiariesAegis Limited 100 Investment Administration and CustodyASB Bank Limited 100 Registered BankASB Capital Limited 100 FinanceASB Capital No.2 Limited 100 FinanceASB Finance Limited 100 FinanceASB Funding Limited 100 Holding CompanyASB Group Investments Limited 100 Investment Administration and ManagementASB Holdings Limited 100 Holding CompanyASB Management Services Limited 100 Management, Payment Services and Property InvestmentASB Nominees Limited 100 Nominee CompanyASB Securities Limited 100 SharebrokingASB Smart Cards Limited 100 Investment Holding CompanyBond Investments No 1 Limited 100 FinanceBond Investments UK Limited 100 FinanceCBA Asset Finance (NZ) Limited 100 FinanceCBA Asset Holdings (NZ) Limited 100 FinanceCBA Dairy Leasing Limited 100 FinanceCBA Funding (NZ) Limited 100 FinanceCBA Investments (No.4) Limited 100 FinanceCBA NZ Holding Limited 100 FinanceCBA Real Estate Funding (NZ) Limited 100 FinanceCBA Real Estate Investments (NZ) Limited 100 FinanceCBA USD Funding Limited 100 FinanceCharter House Investments Limited 100 FinanceGroup Treasury Services NZ Limited 100 FinanceHildon Holdings Limited 100 Non-tradingHildon Investments Limited 100 Non-tradingInvestment Custodial Services Limited 100 Investment CustodianJacques Martin New Zealand Limited 100 Investment and Registry AdministrationKing's Ferry Holdings Limited 100 Non-tradingKing's Ferry Investments Limited 100 Non-tradingKiwi Home Loans (NZ) Limited 100 LendingMcCaig Investments Limited 100 FinancePago Limited 100 Non-tradingSecuritisation Management Services Limited 100 Securitisation ManagementSinatra Investments Limited 100 FinanceSt Giles Investments Limited 100 FinanceStockbridge Holdings Limited 100 Finance

Other Controlled EntitiesASB Cash Fund - Portfolio Investment EntityASB Term Fund - Portfolio Investment EntityMedallion NZ Series Trust 2008-1U - Residential Mortgage Backed SecuritiesMedallion NZ Series Trust 2009-1R - Residential Mortgage Backed SecuritiesMortgage Holding Trust Company Limited - Nominee Company

All Subsidiaries and other Controlled Entities have a balance date of 30 June.

Associates Balance DateCards NZ Limited 15 Financial Services 30 September Electronic Transaction Services Limited 25 EFTPOS 31 March Interchange and Settlement Limited 11 Interchange and Settlement 31 March Mondex New Zealand Limited 20 Smartcard Operations 31 December

Associates do not have the same balance date as Controlled Entities as they are not controlled by the Banking Group.

Summarised financial information for Associates is not provided, as the amounts involved are immaterial.

All Subsidiaries were incorporated in New Zealand except for Bond Investments UK Limited, which was incorporated in the Cayman Islands.

35


17 Controlled Entities and Associates (continued)

Changes in composition of the Banking Group


18 Other Assets

Interest Receivable 187 246 30 80Other Current Assets 67 74 - 1Total Other Assets 254 320 30 81

Amounts due for Settlement within 12 months 238 307 30 81Amounts due for Settlement over 12 months 16 13 - - Total Other Assets 254 320 30 81

On 1 July 2008 ASB Bank Limited purchased 100% of the ordinary capital of Aegis Limited, ASB Group Investments Limited, Investment Custodial Services Limited and Jacques Martin New Zealand Limited from fellow subsidiaries of CBA for consideration of $58m. This resulted in recognition of Net Tangible Assets of $10m (Cash of $12m, Taxation Assets of $5m, Property, Plant and Equipment of $1m and Other Receivables of $3m less Other Liabilities of $11m) and Goodwill of $48m in the Banking Group during the year ended 30 June 2009.

From 1 July 2008 Mortgage Holding Trust Company Limited has been considered to be controlled by the Banking Group and, as such, has been included in the consolidated financial statements of the Banking Group. This did not have any impact on the aggregated results or financial position of the Banking Group. Mortgage Holding Trust Company Limited was previously considered to be controlled by Sovereign Limited, a fellow subsidiary of CBA.

ASB Cash Fund and ASB Term Fund were established on 1 July 2008 and 9 December 2008 respectively. Both funds are Portfolio Investment Entities ("PIE") managed by ASB Group Investments Limited and considered to be controlled by ASB Bank Limited. As such they are included in the Banking Group's financial statements as in-substance subsidiaries.

On 22 September 2008, Equigroup Finance Limited changed its name to CBA Asset Finance (NZ) Limited. This did not have any impact on the aggregated results or financial position of the Banking Group.


On 4 November 2008 ASB Properties Limited, a wholly owned subsidiary of ASB Bank Limited amalgamated with fellow subsidiary ASB Management Services Limited to become ASB Management Services Limited. This did not have any impact on the aggregated results or financial position of the Banking Group.

On 13 November 2008 Securitisation Management Services Limited was incorporated as a wholly owned subsidiary of ASB Bank Limited. This did not have any impact on the aggregated results or financial position of the Banking Group.

Medallion NZ Series Trust 2008-1U and Medallion NZ Series Trust 2009-1R were established on 14 November 2008 and 2 April 2009 respectively to provide an in house residential mortgage backed securities facility that could issue securities that can be used as collateral for borrowing from the RBNZ (refer to Note 43). The Medallion NZ Series Trust 2008-1U programme was unwound on 25 June 2009. The establishment of the facility did not have any impact on the Consolidated financial statements of the Banking Group.

The Banking Group sold its investments in Waterloo & Victoria Limited and Bayswater and Bond Limited on 15 and 18 June 2009 respectively. This did not have any impact on the aggregated results or financial position of the Banking Group.

36


19 Property, Plant and Equipment

ComputerLand Buildings Buildings Furniture & Office Operating

$ millions Freehold Freehold Leasehold & Fittings Equipment Software Total

As at 30 June 2009

Cost / Valuation 24 28 92 81 148 20 393Accumulated Depreciation - - (53) (57) (109) (15) (234)Opening Net Book Value 24 28 39 24 39 5 159Additions - 1 7 6 15 - 29Disposals - - - - (2) - (2)Depreciation - (1) (9) (6) (16) (3) (35)Revaluation - 3 - - - - 3Closing Net Book Value 24 31 37 24 36 2 154

Cost / Valuation 24 31 98 87 159 20 419Accumulated Depreciation - - (61) (63) (123) (18) (265)Closing Net Book Value 24 31 37 24 36 2 154

ComputerLand Buildings Buildings Furniture & Office Operating

Freehold Freehold Leasehold & Fittings Equipment Software Total

As at 30 June 2008

Cost / Valuation 24 27 82 79 134 20 366Accumulated Depreciation - - (46) (53) (96) (12) (207)Opening Net Book Value 24 27 36 26 38 8 159Additions - 1 11 6 19 - 37Disposals (1) (1) - (2) (1) - (5)Depreciation - (1) (8) (6) (17) (3) (35)Revaluation 1 2 - - - - 3Closing Net Book Value 24 28 39 24 39 5 159

Cost / Valuation 24 28 92 81 148 20 393Accumulated Depreciation - - (53) (57) (109) (15) (234)Closing Net Book Value 24 28 39 24 39 5 159

Banking Group

Banking Group

Freehold land and buildings are carried at revalued amounts based on market valuations provided by independent, registered, public valuers. The latest market valuations were undertaken in April 2009 and were applied on 30 June 2009. The primary valuation approach has been based upon comparable improved sales and land sales information supported by an income approach, based on market rentals which have been capitalised at a market yield rate derived from improved property transactions. As at 30 June 2009 under the cost model these assets would have been recognised at a carrying amount of $7m and $13m respectively (30 June 2008 $7m and $10m).

The Registered Bank has no Property, Plant and Equipment as at 30 June 2009 (30 June 2008 Nil).

37


$ millionsAs at 30 June 2009 2008

20 Intangible Assets

Goodwill 323 275Internally Generated Application Software 51 33External Application Software 20 23Total Intangible Assets 394 331

GoodwillBalance at Beginning of Year 275 275Additions 48 - Balance at End of Year 323 275

Impairment Tests for Goodwill

Key Assumptions used in Recoverable Amount Calculations

>

>

>

Internally Generated Application SoftwareCost 48 26Accumulated Amortisation (15) (8)Opening Net Book Value 33 18Additions 34 23Amortisation (16) (8)Closing Net Book Value 51 33

Cost 82 48Accumulated Amortisation (31) (15)Closing Net Book Value 51 33

External Application SoftwareCost 72 62Accumulated Amortisation (49) (44)Opening Net Book Value 23 18Additions 4 10Amortisation (7) (5)Closing Net Book Value 20 23

Cost 78 72Accumulated Amortisation (58) (49)Closing Net Book Value 20 23

The Registered Bank had no Intangible Assets as at 30 June 2009 (30 June 2008 Nil).

No impairment losses have been recognised against the carrying amount of Computer Software for the year ended 30 June 2009 (30 June 2008 Nil).

The recoverable amount relating to the cash generating unit within the Retail Banking Segment was calculated based on net selling price less costs tosell, using an earnings multiple applicable to that type of business.

The recoverable amounts for Aegis Limited and ASB Group Investments Limited were calculated based on their value in use. Value in use for each cash generating unit was determined by discounting the future cash flows expected to be generated from the continuing use of the unit, based on the following assumptions:

The key assumptions described above may change as economic and market conditions change. The Banking Group estimates that reasonably possible changes in these assumptions are not expected to cause the recoverable amount of any unit to decline below the carrying amount of Goodwill.

Cash flows were projected based on management's assessment of product profitability, forecasted growth in revenues and expenses to supporthe business, covering a five year period. Cash flows beyond five years were extrapolated based on a conservative view of growth at a 2.5% rate of inflation.A post-tax discount rate of 11% was applied in determining the recoverable amounts of the investments, in line with the rate used internally by the Banking Group to assess the net present value of business cases for new products or projects.

Banking Group

Goodwill of $275m arose from the initial purchase of 25% of ASB Group Limited by CBA Funding (NZ) Limited. Ownership of the 25% of ASB Group Limited was moved to ASB Holdings Limited when Commonwealth Bank of Australia restructured their New Zealand Operations on 1 July 2001. ASB (Group) Holdings Limited and ASB Holdings Limited amalgamated with ASB Group Limited on 15 and 16 March 2006 respectively. On amalgamation, ownership of ASB Bank Limited was transferred to ASB Group Limited (subsequently renamed ASB Holdings Limited).

Earnings multiples are sourced from publicly available data associated with recent valuations performed on businesses displaying similar characteristics to those cash-generating units, and are applied to current earnings.

Additional Goodwill of $48m arose from the purchase of Aegis Limited and ASB Group Investments Limited by ASB Bank Limited from fellow subsidiaries of CBA on 1 July 2008 (refer to Note 17). During the year ended 30 June 2009 the Banking Group did not identify any events or circumstances that would indicate that Goodwill may be impaired.

For the purpose of impairment testing, Goodwill of $275m has been allocated to the Retail Banking Segment of ASB Bank Limited and $48m was allocated to cash generating units within the Customers, Markets and Products Segment of ASB Bank Limited - $38m to Aegis Limited and $10m to ASB Group Investments Limited. To assess whether Goodwill is impaired the carrying amount of a cash generating unit is compared to the recoverable amount, determined based either on net selling price less costs to sell or on value in use.

No impairment losses were recognised against the carrying amount of Goodwill for the year ended 30 June 2009 (30 June 2008 Nil).

38



21 Deferred Taxation Asset / (Liability)

Balance at Beginning of Year (195) (342) 4 9Taxation Benefit Recognised in the Income Statement 66 66 15 - Taxation Benefit Recognised in Equity 204 81 - (5)Balance at End of Year 75 (195) 19 4

Deferred Taxation relates to:Asset Revaluation Reserves (6) (5) - - Cash Flow Hedge Reserves 198 (7) - - Contributed Capital - Redeemable Preference Shares (210) (210) - - Depreciation 109 127 - - Holiday Pay 6 6 - - Provision for Impairment Losses 97 36 19 4Other Temporary Differences (119) (142) - - Total Deferred Taxation Asset / (Liability) 75 (195) 19 4

Deferred Taxation Recognised in the Income Statement:Deferred Fees - 30 - - Depreciation (18) (16) - - Provision for Impairment Losses 61 6 15 2Other Temporary Differences 23 46 - (2)Total Deferred Taxation Recognised in the Income Statement 66 66 15 -

Deferred Taxation Recognised in Equity:Asset Revaluation Reserves (1) - - - Cash Flow Hedge Reserves 205 81 - (5)Total Deferred Taxation Recognised in Equity 204 81 - (5)

22 Due to Other Banks

569 638 4 - 8,282 7,162 5,258 5,341

Total Due to Other Banks 8,851 7,800 5,262 5,341

Amounts Due to Other Banks are measured as follows:

(a) At Amortised CostCall 545 545 4 - Term 7,617 7,127 5,258 5,341Total at Amortised Cost 8,162 7,672 5,262 5,341

(b) At Fair Value through Profit or LossCall 24 93 - - Term 665 35 - - Total at Fair Value through Profit or Loss 689 128 - -

As at 30 June 2009 the principal at maturity of amounts Due to Other Banks designated as at fair value through Profit or Loss was $689m for the Banking Group and Nil for the Registered Bank (30 June 2008 $128m for the Banking Group and Nil for the Registered Bank).


All changes in fair value are attributable to changes in the benchmark interest rate. Refer to Note 1 for details of the fair valuation methodology.

The reduction in the corporate tax rate from 33% to 30% with effect from 1 July 2008 has been taken into account in calculating the value of Deferred Tax as at 30 June 2009 and 30 June 2008.

CallTerm

ASB Bank Limited has entered into CSA in respect of certain credit exposures relating to derivative transactions. As at 30 June 2009 deposits of $24m relating to collateral received were included in Due to Other Banks (30 June 2008 Nil).

As at 30 June 2009 Deferred Taxation of $(43)m for the Banking Group and $12m for the Registered Bank is expected to crystallise after more than 12 months (30 June 2008 $(220)m Banking Group, $3m Registered Bank).

Securities sold under repurchase agreements with the RBNZ of $200m (30 June 2008 Nil) are included in Term amounts at Fair Value through Profit or Loss (refer to Note 15).

39



23 Money Market Deposits

Money Market Deposits are measured as follows:

(a) At Amortised CostCall 1 - - - Term 198 - - - Certificates of Deposit 624 - - - Other Issued Paper 3,563 4,051 - - Total at Amortised Cost 4,386 4,051 - -

(b) At Fair Value through Profit or LossCall 2,559 2,513 - - Term 806 1,467 - - Certificates of Deposit 2,649 1,920 - - Other Issued Paper 10,270 10,089 - - Total at Fair Value through Profit or Loss 16,284 15,989 - -

Total Money Market Deposits 20,670 20,040 - -

Net Investment Hedge

24 Deposits from Customers

Retail Term Deposits 15,909 15,712 - - Other Deposits Bearing Interest 12,235 10,390 396 851Deposits Not Bearing Interest 1,834 1,719 - - Total Deposits from Customers 29,978 27,821 396 851

25 Other Liabilities

Interest Payable Accrued 293 418 19 75Employee Entitlements 46 63 - - Trade Accounts Payable and Other Liabilities 111 254 2 3Total Other Liabilities 450 735 21 78

Amounts due for Settlement within 12 months 433 716 21 78Amounts due for Settlement over 12 months 17 19 - - Total Other Liabilities 450 735 21 78

The Registered Bank does not have any retail deposits (deposits with natural persons, excluding deposits with an outstanding balance which exceeds $250,000) as at 30 June 2009 (30 June 2008 Nil).

Deposits from Customers are unsecured and rank equally with other unsecured liabilities of the Banking Group. In the unlikely event that ASB Bank Limited or the Registered Bank was put into liquidation or ceased to trade, secured creditors and those creditors set out in the Seventh Schedule of the Companies Act 1993 would rank ahead of the claims of unsecured creditors.

The Banking Group has not defaulted on any principal, interest or redemption amounts on its borrowed funds during the year ended 30 June 2009 (30 June 2008 Nil).


For the year ended 30 June 2009 a loss of $8m was attributable to changes in credit risk for Money Market Deposits designated as at Fair Value through Profit or Loss (30 June 2008 gain of $9m). All other changes in Fair Value are attributable to changes in the benchmark interest rate. Refer to Note 1 for details of the fair valuation methodology.

As at 30 June 2009 the principal at maturity of Money Market Deposits at Fair Value through Profit or Loss was $15,986m for the Banking Group and Nil for the Registered Bank (30 June 2008 $19,156m for the Banking Group and Nil for the Registered Bank).

As at 30 June 2009 the Banking Group had no borrowings designated as net investment hedges. In previous periods Yen denominated borrowing included within Other Issued Paper at Fair Value through Profit or Loss, together with related forward exchange rate contracts, was designated as a hedge of the Banking Group's net investment in a subsidiary and hedged the Banking Group's exposure to the foreign currency risk associated with thisinvestment. The fair value of the borrowing was $717m as at 30 June 2008. Gains or losses on translation of this borrowing to the date of the termination of the hedge have been transferred to FCTR within equity, to offset any gains or losses on translation of the net investment in the subsidiary.

Refer to General Matters on page 1 for details of the rights of New Zealand creditors of the Registered Bank relative to the classes of creditors of CBA.

40



26 Subordinated Debt

Issuer Face Value FootnoteASB Bank Limited NZD 200m (a) 201 201 - - ASB Bank Limited NZD 250m (b) 250 248 - - ASB Bank Limited * NZD 370m (c) 407 380 - - ASB Holdings Limited NZD 1m (d) - 1 - - ASB Holdings Limited NZD 160m (e) - 160 - - CBA Funding (NZ) Limited NZD 700m (f) 1 1 - - CBA Real Estate Funding (NZ) Limited NZD 4m (g) 2 2 - - CBA USD Funding Limited * USD 700m (h) 1,214 970 - - CBA New Zealand Branch AUD 750m (i) - 946 - 946CBA New Zealand Branch * USD 550m (j) 927 742 927 742CBA New Zealand Branch AUD 1,166m (k) 1,441 1,478 1,441 1,478CBA New Zealand Branch USD 700m (l) - - 1,214 970

4,443 5,129 3,582 4,136Terms

ASB Bank Limited

(a)

(b)

(c)

ASB Holdings Limited(d)

(e)

CBA Funding (NZ) Limited(f)

CBA Real Estate Funding (NZ) Limited(g)

Subordinated Notes (NZD 250m) issued to CBA on 29 June 2007, which carry a coupon rate based on the bank bill rate reset quarterly plus a margin of 0.25% per annum until 29 June 2012, after which the margin will increase by 0.5% per annum. They are callable on 29 June 2012 and have a maturity date of 29 June 2017.

Subordinated Notes (NZD 370m) issued on 1 November 2007, with a coupon rate of 8.771% until 15 November 2012, after which the rate will bereset for the remaining term plus an additional 0.5% per annum. They are callable on 15 November 2012 and have a maturity date of 15 November 2017.


All Subordinated Debt issued by ASB Bank Limited carried an AA- rating from Standard and Poor's Pty Limited as at 30 June 2009. It is subordinate toother general liabilities of ASB Bank Limited and qualifies as Lower Tier Two Capital for ASB Bank Limited's Capital Adequacy calculation purposes.

Subordinated Notes (NZD 200m) issued on 15 June 2006, with a coupon rate of 7.03% until 15 June 2011, after which the rate will be reset for the remaining term plus an additional 0.5% per annum. They are callable on 15 June 2011 and have a maturity date of 15 June 2016.

The dividend rate reset quarterly against the bank bill rate, plus a margin. Dividends were payable on 30 September, 31 December, 31 March and 30 June, and were cumulative.

Redeemable Preference Shares (NZD1m) issued to CBA Hong Kong branch on 16 June 2008 which matured on 16 December 2008.

The dividend rate and payment dates were discretionary, and the dividends were non-cumulative. These shares did not hold any voting rights.

Non-participating Redeemable Preference Shares (NZD 700m) issued on 22 December 2006, which must be redeemed 100 years after issue or any earlier date immediately prior to the date on which the liquidation of CBA Funding (NZ) Limited commences. They can also be redeemed earlier with the consent of the holder.

Rights of holders of these shares ranked in priority to all other classes of shares in ASB Holdings Limited, and after all rights of the creditors of ASB Holdings Limited.

Redeemable Preference Shares (NZD 160m) issued to CBA on 30 June 2008 which matured on 30 June 2009.

Non-participating Redeemable Preference Shares (NZD 4m) issued to CBA on 16 March 2006, with a maturity date of 30 September 2024. Dividends are payable at the discretion of the Directors of CBA Real Estate Funding (NZ) Limited.

Under NZ IAS 32 the Redeemable Preference Shares are considered to contain both liability and equity components. The liability component of $2m is classified as Subordinated Debt and the equity component of $2m which is net of income tax effects, has been recognised in Equity (refer to Note 27).

Dividends, based on the swap rate plus a margin, are payable six-monthly on 31 December and 30 June starting from June 2007, at the discretion of the Directors of CBA Funding (NZ) Limited. Dividends are non-cumulative.

On liquidation of CBA Funding (NZ) Limited, the holder of the Redeemable Preference Shares will be entitled to the redemption price in priority to any rights in respect of Ordinary Shares but after any rights in respect of all other classes of shares in CBA Funding (NZ) Limited ranking ahead of the Redeemable Preference Shares.

Under NZ IAS 32 the Redeemable Preference Shares are considered to contain both liability and equity components. The liability component of $1m is classified as Subordinated Debt and the equity component of $489m which is net of income tax effects, has been recognised in Equity (refer to Note 27). A Deferred Taxation liability of $210m has also been recognised with respect to these shares (refer to Note 21).

41


26 Subordinated Debt (continued)

CBA USD Funding Limited(h)

CBA New Zealand Branch (Registered Bank)(i)

(j)

(k)

(l)

*

The rights of the holder of the Note are subordinate to the claims of senior creditors of CBA.

50 year USD Note (USD 700m) issued on 15 March 2006. Interest is cumulative and is paid semi-annually for the first 10 years, then quarterly until redemption. The interest is stepped, paying fixed at 6.024% for the first 10 years, then at LIBOR plus a margin.

The rights of holders of the Convertible Notes are subordinate to the claims of senior creditors of CBA.

Convertible notes (AUD 750m) which were repaid on 16 March 2009. These notes would have automatically converted to CBA preference shares on 6 January 2044. The coupon rate was reset against the AUD 90 day Bank Bill Rate plus a margin.

Subordinated Debt is recognised in the Balance Sheet at its New Zealand dollar equivalent. The Banking Group has entered into Cash Flow and Fair Value hedges relating to Subordinated Debt issued by ASB Bank Limited and CBA New Zealand Branch (refer to Note 14).

50 year cumulative USD Branch Note (USD 700m) issued to CBA USD Funding Limited on 15 March 2006. Interest is cumulative and is paid semi-annually. The interest is stepped, paying fixed at 6.024% for the first 10 years, then at LIBOR plus a margin.

The rights of holders of the convertible notes are subordinated to CBA's obligations to its depositors and other creditors. On winding up of CBA the convertible notes rank equally with Ordinary Shares.

The rights of holders of the convertible notes were subordinated to CBA's obligations to its depositors and other creditors. On winding up of CBAthe convertible notes would have ranked equally with Ordinary Shares.

Convertible notes (USD 550m), which have no stated maturity but which will automatically convert to CBA Preference Shares on 30 June 2053. The convertible notes have a fixed coupon rate of 5.8% and are callable from 30 June 2015.

The rights of holders of the convertible notes are subordinated to the claims of senior creditors of CBA.

Convertible notes (AUD 1,166m) which automatically convert to CBA preference shares on 23 February 2046. The coupon rate is reset against the AUD 90 day Bank Bill Rate minus 0.28%.

42



27 Head Office Account and Contributed Capital

Head Office AccountBalance at Beginning of Year 262 254 262 254Head Office Contribution 200 8 200 8Balance at End of Year 462 262 462 262

Issued and Fully Paid Ordinary SharesBalance at Beginning of Year 704 534 - - Proceeds from Shares Issued - 170 - - Balance at End of Year 704 704 - -

Issued and Fully Paid Redeemable Preference SharesBalance at Beginning of Year 1,271 491 - - Proceeds from Shares Issued - 780 - - Balance at End of Year 1,271 1,271 - -

Total Contributed Capital 1,975 1,975 - -

Ordinary Shares

Redeemable Preference Shares

28 Asset Revaluation Reserves

Balance at Beginning of Year 29 27 - - Revaluations 2 3 - - Deferred Income Tax (1) - - - Transferred to Retained Earnings - (1) - - Balance at End of Year 30 29 - -

29 Available for Sale Reserves

Balance at Beginning of Year 19 - - - Net (Loss) / Gain from Changes in Fair Value (4) 64 - - Transferred to Profit or Loss - (45) - - Balance at End of Year 15 19 - -

30 Cash Flow Hedge Reserves

Balance at Beginning of Year 6 191 (11) (13)Net (Loss) / Gain from Changes in Fair Value (915) 72 (4) (7)Transferred to Profit or Loss :

Interest Income (26) 31 - - Interest Expense 268 (373) 13 10

Deferred Tax 205 81 - (5)Current Tax (3) 4 (3) 4Balance at End of Year (465) 6 (5) (11)

Asset Revaluation Reserves relate to revaluation gains on land and buildings carried at valuation, except that to the extent that the gain reverses a revaluation loss on the same asset previously recognised in the Income Statement, the gain is recognised in the Income Statement.

Available for Sale Reserves include the cumulative net change in the fair value of Available for Sale Financial Assets until the investment is derecognised or impaired.

Cash Flow Hedge Reserves comprise the effective portion of the cumulative net change in the fair value of foreign exchange and interest rate derivative contracts related to hedged forecasted transactions that have not yet occurred.

All Ordinary Shares have equal voting rights and share equally in dividends and any profit on winding up, after the obligations to holders of ASB Bank Limited Perpetual Preference Shares are satisfied. Dividends are declared subject, in all cases, to the applicable Directors' resolutions being passed.

No Redeemable Preference Shares were issued during the year ended 30 June 2009. During the period ended 30 June 2008 780,000,000 Redeemable Preference Shares were issued and were classified as equity. These shares have no fixed term, carry no voting rights and are redeemable by CBA Funding (NZ) Limited providing 75 days notice to the holder of the shares. Dividends are payable at the discretion of the Directorsof CBA Funding (NZ) Limited and are non-cumulative.

As at 30 June 2009 the Banking Group had 1,484,240,000 Issued and Fully Paid Redeemable Preference Shares (30 June 2008 1,484,240,000 Issuedand Fully Paid Preference Shares).

Redeemable Preference Shares includes the equity component of Redeemable Preference Shares issued by CBA Funding (NZ) Limited and CBA Real Estate Funding (NZ) Limited, net of income tax effects. These shares were issued during the year ended 30 June 2007. Refer to Note 26 (f) and (g) for a description of the terms of the Redeemable Preference Shares.


As at 30 June 2009 the Banking Group had 727,546,880 Ordinary Shares on issue of which 100,000 were unpaid (30 June 2008 727,546,880 Issued of which 100,000 were unpaid). No shares were issued during the year ended 30 June 2009 (30 June 2008 170,000,000 Ordinary Shares were issued by ASB Holdings Limited to Commonwealth Bank of Australia).

Head Office Account comprises funds provided by CBA to support its New Zealand branch. It is non-interest bearing and there is no fixed date for repatriation.

43



31 Foreign Currency Translation Reserves

Balance at Beginning of Year - - - - Currency Translation Differences 305 78 - - Net Investment Hedge (419) (116) - - Current Income Tax 115 38 - - Balance at End of Year 1 - - -

32 Retained Earnings

Balance at Beginning of Year 569 689 21 7345 456 7 22914 1,145 28 29

Add :Transfer from Asset Revaluation Reserve - 1 - -

Less:Ordinary Dividends - 512 - - Redeemable Preference Dividends 57 57 - - Distribution of Prior Year Profit - 8 - 8Balance at End of Year 857 569 28 21

33 Minority Interests

Controlled Entities: Share Capital 550 550 - -

Perpetual Preference Dividends paid to Minority Interests

ASB Capital Limited 12 13 - - ASB Capital No. 2 Limited 22 21 - -

34 34 - -

> before all rights of ordinary shareholders;> after all rights of holders of shares of ASB Bank Limited other than ordinary or preference shares; and> after all rights of creditors of ASB Bank Limited.

Events after the Balance Sheet Date

Also, on 15 July 2009 the Directors of ASB Capital No.2 Limited declared a Perpetual Preference Dividend of $3m, being 0.97 cents per share. The dividend was paid on 17 August 2009 to all registered holders of Perpetual Preference Shares as at 5.00pm on 7 August 2009.

Foreign Currency Translation Reserves comprise exchange differences on translation of foreign currency assets and liabilities of an overseas subsidiary. The Banking Group has hedged its net investment in the foreign subsidiary on an after tax basis.


As at 30 June 2009 the Banking Group had 550,000,000 Issued and Fully Paid Perpetual Preference Shares (30 June 2008 550,000,000 Issued and Fully Paid Perpetual Preference Shares). These shares constitute a Minority Interest in the Banking Group.

In December 2002 ASB Capital Limited issued 200,000,000 Perpetual Preference Shares. In December 2004 ASB Capital Limited No.2 Limited issued 350,000,000 Perpetual Preference Shares. These shares have no fixed term, are non-redeemable and carry limited voting rights. They were issued as part of transactions with ASB Bank Limited.

Under these transactions, ASB Capital Limited and ASB Capital No.2 Limited have advanced proceeds received from a public issue of their Perpetual Preference Shares to ASB Funding Limited. ASB Funding Limited in turn invested the proceeds in Perpetual Preference Shares issued by ASB Bank Limited. ASB Funding Limited and New Zealand Guardian Trust Company Limited (the "Trustee") together with ASB Capital Limited and ASB Capital No.2 Limited respectively are party to Trust Deeds, whereby ASB Funding Limited provides covenants to the Trustee for the benefit of holders of the ASB Capital Limited and ASB Capital No.2 Limited Perpetual Preference Shares and grants security over the ASB Bank Perpetual Preference Sharesin favour of the Trustee.

Dividends are payable quarterly in arrears and are payable at the discretion of the Directors of ASB Capital Limited and ASB Capital No.2 Limited. These dividends are non-cumulative.

The dividend payable on ASB Capital Limited Perpetual Preference Shares is based on the one year swap rate, plus a margin of 1.3%. The gross dividend rate paid on the Perpetual Preference Shares for the period ended 15 November 2008 was 9.95% per annum. Rates are reset annually on 15 November or the succeeding business day. The rate was reset on 15 November 2008 to 6.73% per annum. The next dividend reset date is 16 November 2009.

Dividends on Perpetual Preference Shares were 5.82 cents per share (30 June 2008 6.30 cents per share) paid by ASB Capital Limited and 6.33 cents per share (30 June 2008 6.10 cents per share) paid by ASB Capital No.2 Limited for the year ended 30 June 2009.

The dividend payable on the ASB Capital No.2 Limited Perpetual Preference Shares is based on the one year swap rate, plus a margin of 1.0%. The gross dividend rate paid on the Perpetual Preference Shares for the period ended 15 May 2009 was 9.03% per annum. Rates are reset annually on 15 May or succeeding business day. The rate was reset on 15 May 2009 to 3.86% per annum. The next dividend reset date is 17 May 2010.

In the event of the liquidation of ASB Bank Limited, payment of the issue price and dividends on the ASB Bank Limited Perpetual Preference Shares ranks:

Net Profit after Taxation Attributed to Parent Company Shareholders

On 15 July 2009 the Directors of ASB Capital Limited declared a Perpetual Preference Dividend of $3m, being 1.68 cents per share. The dividend was paid on 17 August 2009 to all registered holders of Perpetual Preference Shares as at 5.00pm on 31 July 2009.

44



34 Reconciliation of Net Profit after Taxation to Net Cash Flows from Operating Activities


Add: Non-cash ItemsImpairment Losses on Advances 305 47 67 7Depreciation 35 35 - - Amortisation of Intangible Assets 23 13 - - Net Loss on Sale of Property, Plant and Equipment 2 1 - -

365 96 67 7Add: Movements in Balance Sheet ItemsChanges in Operating Assets and Liabilities 528 (2,560) 597 (25)Interest Receivable - Decrease / (Increase) 243 (171) 46 (16)Interest Payable - (Decrease) / Increase (261) 217 (68) 38Other Income Accrued - Decrease 323 502 76 18Operating Expenses Accrued - (Decrease) / Increase (60) 18 (1) - Taxation Balances - Increase / (Decrease) 12 44 (6) -

785 (1,950) 644 15Net Cash Flows from Operating Activities 1,529 (1,364) 718 44

35 Reconciliation of Cash and Cash Equivalents to the Balance Sheet

Cash and Call Deposits with the Central Bank 1,582 1,155 44 59Call Deposits Due from Other Banks 1,153 43 - 9Call Deposits Due to Other Banks (569) (638) (4) - Total Cash and Cash Equivalents at End of Year 2,166 560 40 68

36 Imputation and Policyholder Credit Accounts

Imputation Credit Account

Balance at Beginning of Year 13 79 - - Opening Balances of Associates Entering the ICA Group 5 - - - Transfer from the PCA - 57 - - Net Income Tax Paid 53 38 - - Imputation Credits Attached to Dividends Received 16 106 - - Imputation Credits Attached to Dividends Paid (31) (267) - - Balance at End of Year 56 13 - -

Balance at Beginning of Year - 57 - - Transfer to ICA - (57) - - Balance at End of Year - - - -

New provisional tax instalment dates applied for the year ended 30 June 2009. The final instalment date for provisional tax for the year ended 30 June 2009 was payable after balance date. The ICA balances for ASB Capital Limited and ASB Capital No.2 Limited are therefore debit balances at 30 June 2009.

ASB Capital Limited and ASB Capital No.2 Limited are not members of the ICA Group. ASB Capital Limited and ASB Capital No.2 Limited had debit imputation credit account balances of $1m and $2m respectively (30 June 2008 $1m credit and $1m credit respectively).

Policyholder Credit Account

Because a member of the ICA Group is a life insurance company, the ICA Group is required to maintain a policyholder credit account ("PCA"). A balance in a PCA can be transferred back to an imputation credit account and is therefore available to shareholders (and shareholders of other ICA Group members).


Dividends paid by companies may attach imputation credits representing the New Zealand tax already paid by the company or tax group on profits. New Zealand resident shareholders may claim a tax credit to the value of the imputation credit attached to dividends.

ASB Bank Limited and some of its subsidiaries have formed an imputation group with other members of the Commonwealth Bank of Australia Group ("ICA Group"). The closing imputation credit account balances presented below represent the imputation credits available to all members of the ICA Group.

45


37 Related Party Transactions and Balances

Guarantees

Derivative Transactions

Other


Commonwealth Bank Group (100% Ultimate Shareholder)

Due from Other BanksBalance at Beginning of Year 169 297 3,796 3,709Net Movement (66) (128) (546) 87Balance at End of Year 103 169 3,250 3,796

Interest Income on Due from Other Banks 3 10 271 356


No Provisions for Impairment Loss have been recognised in respect of loans given to Related Parties (30 June 2008 Nil).

ASB Bank Limited had foreign exchange contracts with Trusts managed or administered by the Commonwealth Bank of Australia New Zealand Life Insurance Group with a face value of $578m (30 June 2008 $776m).

A payment of $14m (30 June 2008 $13m) was made to the Commonwealth Bank of Australia New Zealand Life Insurance Group, for the origination of mortgages.

A payment of $3m (30 June 2008 $4m) was made to Commonwealth Bank Group for arrangement fees.

Receipts of $33m (30 June 2008 $24m) were received from the Commonwealth Bank of Australia New Zealand Life Insurance Group, for insurance commission and profit share.

No receipts (30 June 2008 $13m) were received from the Commonwealth Bank of Australia New Zealand Life Insurance Group, for distribution of fund management services. In comparative periods the Commonwealth Bank of Australia New Zealand Life Insurance Group managed and administered these services. Since 1 July 2008 the entity providing these services, ASB Group Investments Limited, has been a wholly owned subsidiary of ASB Bank Limited.

Receipts of $12m (30 June 2008 Nil) were received from the Commonwealth Bank of Australia New Zealand Life Insurance Group, for investment management fees.

Refer to Note 26 for details of Subordinated Debt issued to Related Parties and Note 27 for details of Capital contributed by Related Parties.

The total liabilities of the Registered Bank net of amounts due to related parties is $231m as at 30 June 2009 (30 June 2008 $125m).

Refer to Note 9 for details of dividends paid to shareholders.

The ultimate parent bank is CBA. The Commonwealth Bank Group refers to CBA and the various companies and other entities owned and controlled by CBA. Commonwealth Bank of Australia New Zealand Life Insurance Group includes Colonial Group and ASB Group (Life) Limited Group of Companies.

During the year ended 30 June 2009, the Banking Group has entered into, or had in place various financial transactions with members of the Commonwealth Bank Group, and other related parties. ASB Bank Limited provides administrative functions to some subsidiaries and related companies for which no payments have been made. In all other cases, arrangements with related parties were conducted on an arm's length basis and on normal commercial terms, and within the Banking Group's approved policies. Loans to and borrowings from related parties are unsecured.

Receipts of $17m (30 June 2008 $23m) were received from the Commonwealth Bank of Australia New Zealand Life Insurance Group, for administrative functions provided by ASB Bank Limited.

Net Payments of $56m (30 June 2008 $22m) were received from the Commonwealth Bank of Australia New Zealand Life Insurance Group for the utilisation of tax-related items.

Distribution and Administrative Services

Transactions processed during the year ended 30 June 2009 included:

The Banking Group has in place interest rate swaps with Commonwealth Bank Group with a face value of $11,798m (30 June 2008 $8,565m), interest rate options with a face value of $359m (30 June 2008 $312m), currency swaps with a face value of $7,874m (30 June 2008 $8,240m), foreign exchange contracts with a face value of $2,123m (30 June 2008 $2,931m), no forward commodity contracts (30 June 2008 face value $1m), and forward rate agreements with a face value of $246m (30 June 2008 $1,930m).

Controlled Subsidiaries of the Banking Group manage and administer a number of Superannuation, Unit and Other Trusts. These trusts hold someof their funds with ASB Bank Limited. Total deposits held with ASB Bank Limited as at 30 June 2009 were $1,211m (30 June 2008 $1,073m) and total interest expense related to these deposits for the year ended 30 June 2009 was $63m (30 June 2008 $94m). These deposits are held on normal commercial terms and conditions. In comparative periods the Commonwealth Bank of Australia New Zealand Life Insurance Group managed and administered these Trusts (refer to Note 17 for changes in the Banking Group composition).

Commonwealth Bank Group provides guarantees over various lending offered by ASB Bank Limited to the value of $186m (30 June 2008 $132m).

ASB Bank Limited had foreign exchange contracts with the Commonwealth Bank of Australia New Zealand Life Insurance Group with a face value of $1,379m (30 June 2008 $1,383m) and interest rate swaps with a face value of $1,814m (30 June 2008 $1,814m) upon which interest paid amounted to $15m (30 June 2008 $10m).

46



37 Related Party Transactions and Balances (continued)

Commonwealth Bank Group (100% Ultimate Shareholder)

Advances to CustomersBalance at Beginning of Year - - 1,167 479Net Movement - - (708) 688Balance at End of Year - - 459 1,167

Other Assets - 4 13 37

Due to Other BanksBalance at Beginning of Year 7,697 7,086 5,341 4,202Net Movement 842 611 (79) 1,139Balance at End of Year 8,539 7,697 5,262 5,341

Interest Expense on Due to Other Banks 461 270 407 504

Money Market DepositsBalance at Beginning of Year - - - - Net Movement 373 - - - Balance at End of Year 373 - - -

Subordinated DebtBalance at Beginning of Year 4,550 4,771 4,136 2,777Net Movement (715) (221) (554) 1,359Balance at End of Year 3,835 4,550 3,582 4,136

Interest Expense on Subordinated Debt 258 258 160 191

Derivative Liabilities / (Assets)Balance at Beginning of Year 229 738 451 605Net Movement 280 (509) (300) (154)Balance at End of Year 509 229 151 451

Deposits from CustomersBalance at Beginning of Year - - 728 1,644Net Movement - - (562) (916)Balance at End of Year - - 166 728

Other Liabilities 23 134 19 75

Commonwealth Bank of Australia New Zealand Life Insurance Group (Subsidiaries of Commonwealth Bank Group)

Derivative Assets / (Liabilities)Balance at Beginning of Year 14 (76) - - Net Movement (22) 90 - - Balance at End of Year (8) 14 - -

Other Assets 4 8 - -

Deposits from CustomersBalance at Beginning of Year 537 494 - - Net Movement 65 43 - - Balance at End of Year 602 537 - -

Interest Expense on Deposits from Customers 37 47 - -

Money Market DepositsBalance at Beginning of Year 30 - - - Net Movement - 30 - - Balance at End of Year 30 30 - -

Other Liabilities 2 1 - -

Derivative Assets / (Liabilities)Balance at Beginning of Year 22 (23) - - Net Movement (19) 45 - - Balance at End of Year 3 22 - -

Other assets and liabilities include sundry debtors and creditors and accrued interest.


Trusts Managed or Administered by the Banking Group (Subsidiaries of Commonwealth Bank Group)

47



38 Directors and Key Management Personnel

Key Management Compensation

Short Term Employee Benefits 10 6Other Long Term Benefits 8 5Total Key Management Compensation 18 11

Loans to Directors and Key Management Personnel

Balance at Beginning of Year 8 9Adjustment due to change in Key Management Personnel (1) (1)Received During the Year 4 8Repaid During the Year (5) (8)Balance at End of Year 6 8

Interest Income* - -

Deposits from Directors and Key Management Personnel

Balance at Beginning of Year 7 6Adjustment due to change in Key Management Personnel (2) - Received During the Year 26 31Repaid During the Year (28) (30)Balance at End of Year 3 7

Interest Expense* - -

*

As at 30 June$ millions Notional Credit Notional Credit

Amount Equivalent Amount Equivalent

39 Credit and Capital Commitments, and Contingent Liabilities

(a) Credit and Capital CommitmentsLending Commitments Approved but Not Yet Advanced 11,214 2,110 10,702 2,199Capital Expenditure Commitments 3 3 4 4

Total Credit and Capital Commitments 11,217 2,113 10,706 2,203

Credit and Capital CommitmentsLending Commitments Approved but Not Yet Advanced 3,246 815 2,397 881

(b) Contingent LiabilitiesGuarantees 60 60 57 57Standby Letters of Credit 91 91 152 152Other Credit Facilities 112 49 104 46

Total Contingent Liabilities 263 200 313 255

The Registered Bank has no contingent liabilities as at 30 June 2009 (30 June 2008 Nil).

All loans were made in the ordinary course of business of ASB Bank Limited on an arm's length basis and on normal commercial terms and conditions. The interest rates applicable were between 5.39% and 19.95% (30 June 2008 7.3% and 20.75%). Terms of repayment range between variable, fixed rates up to three years, and interest only loans, all of which have been in accordance with ASB Bank Limited's lending policies.

Deposits consist of on call, savings, cheque, term investments and cash management balances, all lodgements being made and conducted on an arm's length basis in the normal course of business and on commercial terms and conditions.

Interest is received and paid on Loans and Deposits respectively at market rates but is reported as Nil in most periods, as a result of roundingto the nearest million.

Interest rates are from 0% to 4.50% (30 June 2008 0% to 9.25%), terms of repayment ranging between on call and six months.

Banking Group

Registered Bank

Banking Group

Banking Group

2009 2008

The executive management of ASB Bank Limited and the New Zealand Chief Executive of the Commonwealth Bank of Australia are considered to be Key Management Personnel.

48


39 Credit and Capital Commitments, and Contingent Liabilities (continued)

(c)


40 Leasing and Other Commitments

Leasing Commitments

The following non-cancellable operating lease commitments existed at the end of the year:

Within One Year of Balance Date 43 36 - - Between One and Two Years 37 32 - - Between Two and Five Years 71 69 - - Over Five Years 34 24 - -

Total Leasing Commitments 185 161 - -

Other Commitments 17 7 - -

On the basis that amended assessments will be issued for all tax years from 2001 onward in relation to all applicable transactions entered into by members of the Banking Group, the total tax in dispute is $190m ($282m including tax effected interest as at 30 June 2009).

ASB Bank Limited has taken extensive independent tax and legal advice and is confident the tax treatment it has adopted for the transactions is correct.

In November 2006 the Commerce Commission issued proceedings against Visa, MasterCard and 11 financial institutions, including ASB Bank Limited, for alleged price fixing and substantially lessening competition in relation to credit card interchange fees and rules. Those proceedings seek to have the conduct declared unlawful and unspecified monetary penalties. Also in November 2006, similar proceedings were issued against the same defendants by a number of New Zealand retailers. The retailers' proceedings seek to have the conduct declared unlawful, an inquiry into damages and exemplary damages. Both proceedings are being defended by ASB Bank Limited. ASB Bank Limited has received legal advice and considers that it has good prospects of successfully defending the claims.

The New Zealand Inland Revenue Department ("IRD") has reviewed certain structured finance transactions undertaken in New Zealand by various financial institutions.

Amended assessments for the 2001 to 2004 tax years have been issued by IRD in relation to transactions entered into by members of the Banking Group. ASB Bank Limited expects IRD in due course to issue amended assessments for all applicable tax years. ASB Bank Limited has commenced proceedings challenging the amended assessments received and intends to similarly challenge any further amended assessments received.

New Zealand Structured Finance Transactions

ASB Bank Limited leases various premises under non-cancellable operating lease agreements. The leases have varying terms and renewal rights. ASB Bank Limited also leases motor vehicles and certain office equipment. Lease expenditure is charged to the Income Statement (refer to Note 6).

ASB Bank Limited has entered into certain sub-leasing arrangements. Sub-leasing income of $3m for the year ended 30 June 2009 (30 June 2008 $1m) was included in the Income Statement.


The Banking Group has other contingent liabilities in respect of actual and potential claims and proceedings. An assessment of the Banking Group's likely loss in respect of these matters has been made on a case by case basis and provision made in the financial statements where appropriate. Information relating to any matter is not disclosed where it can be expected to prejudice seriously the position of the Banking Group.

Other Contingent Liabilities

Commerce Commission

49


41 Fair Value of Financial Instruments

Carrying Fair Carrying Fair$ millions Amount Value Amount Value

Balance Sheet Items

As at 30 June 2009

Cash and Call Deposits with the Central Bank 1,582 1,582 44 44Due from Other Banks at Amortised Cost 103 103 3,250 3,038Advances to Customers 58,846 59,176 5,648 5,647Other Assets 254 254 30 30

Due to Other Banks at Amortised Cost 8,162 7,957 5,262 5,260Money Market Deposits at Amortised Cost 4,386 4,285 - - Deposits from Customers 29,978 29,944 396 395Other Liabilities 450 450 21 21Subordinated Debt 4,443 3,402 3,582 2,586

As at 30 June 2008

Cash and Call Deposits with the Central Bank 1,155 1,155 59 59Due from Other Banks at Amortised Cost 37 37 3,738 3,738Advances to Customers 55,773 55,192 6,530 6,476Other Assets 320 320 81 81

Due to Other Banks at Amortised Cost 7,672 7,447 5,341 5,341Money Market Deposits at Amortised Cost 4,051 3,994 - - Deposits from Customers 27,821 27,787 851 851Other Liabilities 735 735 78 78Subordinated Debt 5,129 4,907 4,136 3,940

Off Balance Sheet Items

Registered Bank

The following table summarises the carrying amounts and fair values of those financial assets and financial liabilities not presented in the Banking Group's Balance Sheet at their fair value. Refer to Note 1 for a description of how fair values are estimated.

There are no fair values for Direct Credit Substitutes, Trade and Performance Related Items and Commitments as no secondary market exists.

Banking Group

50


42 Capital AdequacyUnaudited

Regulatory Changes - Basel II

>>> Capital must not be less than NZ$30m

The objective of the Basel II Framework is to develop capital adequacy guidelines that are more accurately aligned with the individual risk profile of banks. Basel II consists of three pillars: Pillar One covers capital requirements for banks for credit, operational, and market risks; Pillar Two covers alother material risks not already included in Pillar One; and Pillar Three relates to market disclosure. Pillar Three has resulted in increased disclosuresin the General Disclosure Statement of ASB Bank Limited from 31 March 2008. However, under RBNZ Orders in Council, CBA New Zealand Branch will continue to report under the previous Basel framework ("Basel I" approach) and there will be little change to the disclosures in the Banking Group's General Disclosure Statement.

As a Condition of Registration, the ASB Banking Group must comply with the following minimum requirements set by the RBNZ:Total Regulatory Capital must not be less than 8% of Risk Weighted ExposuresTier One Capital must not be less than 4% of Risk Weighted Exposures

Capital Management Policies

The Banking Group’s objectives for the management of capital are to comply at all times with the regulatory capital requirements set by the RBNZ; to maintain a strong capital base to cover the inherent risks of the business in excess of that required by rating agencies to maintain strong or very strong credit gradings within the group; and to support the future development and growth of the business.

Regulatory capital is divided into Tier One and Tier Two Capital. Tier One Capital primarily consists of Shareholders' Equity and other capital instruments acceptable to the RBNZ, less Intangible Assets and other prescribed deductions. Tier Two Capital consists of two levels, with Upper Tier Two Capital comprising Asset Revaluation Reserves and Foreign Currency Translation Reserves, and Lower Tier Two Capital comprising Subordinated Debt. Tier Two Capital also includes other hybrid and debt instruments acceptable to the RBNZ and is subject to prescribed deductionsThe tangible element of investments in subsidiaries that are not wholly owned or funded is deducted from the sum of Tier One and Tier Two Capital to

i t T t l R l t C it l

The Capital Adequacy table on page 57 summarises the capital adequacy ratios for the Overseas Banking Group as at 30 June 2009. Risk Weighted Exposures for the Banking Group are set out on the following pages. During the year ended 30 June 2009 and the comparative year shown, the Banking Group complied with all of the RBNZ capital requirements to which it is subject. As part of the June 2009 annual policy review, the Board of ASB Bank Limited approved an increase in minimum internal policy levels for regulatory capital to be held. Both ASB Bank Limited and CBA hold surplus regulatory capital to internal policy minimums.

The Boards of Directors for ASB Bank Limited and CBA (the Overseas Bank) have ultimate responsibility for capital adequacy, and approve capital policy and minimum capital levels and limits. These are typically at a higher level than required by the regulator, which both reduces the risk of breaching conditions of registration and provides investor confidence. ASB Bank Limited and CBA each actively monitor the respective capital adequacy, and report this on a regular basis to senior management and the respective Boards. This includes forecasting capital requirements so that any capital requirements can be executed in a timely manner. The Banking Group considers other stakeholders' requirements when managing capital, and uses a mix of capital instruments to reduce single source reliance and to optimise capital efficiency.

The Conditions of Registration with which CBA New Zealand Branch must comply are set out on pages 5-6.

The Basel Committee has issued a revised framework for the calculation of capital adequacy for banks, commonly known as Basel II. The ASB Banking Group was accredited by the RBNZ to adopt the internal ratings based approach for calculating regulatory capital requirements under Basel Ifrom the first quarter of 2008. The Overseas Bank, CBA has also been accredited by APRA to calculate regulatory capital under Basel II from 2008.

Under the Basel II internal models based approach, Risk Weighted Exposures represent risks associated with the Banking Group's Credit Risk Exposures, as well as operational risk and both traded and non-traded market risk, estimated in accordance with RBNZ banking supervision guidelines.

The Banking Group is subject to regulation by the Reserve Bank of New Zealand ("RBNZ"), by way of two banking licences, one for ASB Bank Limitedand its subsidiaries (the “ASB Banking Group”), and another for the New Zealand branch of CBA (the Registered Bank for the purposes of this disclosure statement). The RBNZ registration requirements set out, among other things, minimum regulatory capital requirements for banks that are consistent with the internationally agreed framework developed by the Basel Committee on Banking Supervision. These capital requirements define what is acceptable as qualifying regulatory capital and provide for methods of measuring the risks incurred by banks. The ASB Banking Group and CBA New Zealand Branch must comply with RBNZ registration requirements, including any minimum capital adequacy ratios under the Conditions of Registration for each respective banking licence.

Regulatory capital adequacy ratios are calculated by expressing capital (Tier One, Tier Two or Total Regulatory Capital) as a percentage of Risk Weighted Exposures.

Under the Basel I approach, Risk Weighted Exposures are derived by assigning a risk weight percentage to certain categories of exposures, comprising Balance Sheet assets (excluding Intangible Assets and Capital Deductions for Investments in Subsidiaries not Wholly Owned or Funded), and Off Balance Sheet assets. There are four risk weighting categories - 0%, 20%, 50% and 100%. It should be noted that the regulatory risk weightings may not be consistent with the loss experience of the Banking Group. In addition there are RBNZ banking supervision guidelines for standard market risk measurement and disclosure for both traded and non traded banking assets.

ASB Bank Limited's capital management policies are organised into three functional areas, being Capital Adequacy (ensuring adequate capital base), Capital Performance (monitoring risk / return and shareholder value) and Capital Execution. Key attributes of the Banking Group's Capital Adequacy policy and processes as they pertain to regulatory capital are set out below.

51


42 Capital Adequacy (continued)Unaudited

RISK WEIGHTED EXPOSURES

As at 30 June 2009

RiskPrincipal Risk WeightedAmount Weight Exposure

$ millions % $ millions

Balance Sheet ExposuresCash and Short Term Claims on Government 4,461 - - Long Term Claims on Government 24 10 2Claims on Banks 4,496 20 899Claims on Public Sector Entities 379 20 76Claims Secured by Residential Mortgages 37,730 50 18,865Other 22,001 100 22,001Non-risk Weighted Assets 2,571 - - Total Balance Sheet Exposures 71,662 41,843(excludes Intangible Assets)

Credit Credit Average RiskPrincipal Conversion Equivalent ounterparty WeightedAmount Factor Amount Risk Weight Exposure

$ millions % $ millions % $ millions

Off Balance Sheet ExposuresDirect Credit Substitutes 151 100 151 100 151Commitments with Certain Drawdown 1,063 100 1,063 60 639Underwriting and Sub-underwriting Facilities - 50 - 100 - Transaction Related Contingent Items 91 50 46 100 46Short Term, Self-liquidating Trade Related Contingencies 21 20 4 95 4

One Year or More 2,099 50 1,050 100 1,050 Less Than One Year or Can Be Cancelled at Any Time 8,052 - - - -

Market Related Contracts (Current Exposure):Foreign Exchange Contracts 26,404 3 851 30 252Interest Rate Contracts 128,346 2 2,556 25 645Other 11 18 2 100 2

Total Off Balance Sheet Exposures 2,789

Total Risk Weighted Exposures 44,632

Banking Group

Other Commitments to Provide Financial Services with Original Maturity of:

52



RISK WEIGHTED EXPOSURES (continued)

As at 30 June 2008



Balance Sheet ExposuresCash and Short Term Claims on Government 2,349 - - Long Term Claims on Government 677 10 68Claims on Banks 3,839 20 768Claims on Public Sector Entities 221 20 44Claims Secured by Residential Mortgages 36,437 50 18,219Other 21,217 100 21,217Non-risk Weighted Assets 1,252 - - Total Balance Sheet Exposures 65,992 40,316(excludes Intangible Assets)

Credit Credit Average RiskPrincipal Conversion EquivalentCounterparty WeightedAmount Factor Amount Risk Weight Exposure


Off Balance Sheet ExposuresDirect Credit Substitutes 299 100 209 100 209Commitments with Certain Drawdown 1,088 100 1,088 60 654Underwriting and Sub-underwriting Facilities 1 50 1 100 1Transaction Related Contingent Items 83 50 42 100 42Short Term, Self-liquidating Trade Related Contingencies 20 20 4 100 4

One Year or More 2,230 50 1,115 100 1,115 Less Than One Year or Can Be Cancelled at Any Time 7,388 - - - -

Market Related Contracts (Current Exposure):Foreign Exchange Contracts 27,638 4 1,199 25 300Interest Rate Contracts 122,306 1 807 22 181Other 27 26 7 100 7

Total Off Balance Sheet Exposures 2,513


Banking Group

Other Commitments to Provide Financial Services with Original Maturity of:

53




As at 30 June 2009



Balance Sheet ExposuresCash and Short Term Claims on Government 641 - - Claims on Banks 3,250 20 650Other 5,694 100 5,694Non-risk Weighted Assets 312 - - Total Balance Sheet Exposures 9,897 6,344

Credit Credit Average RiskPrincipal Conversion Equivalent Counterparty WeightedAmount Factor Amount Risk Weight Exposure


Off Balance Sheet ExposuresOther Commitments to Provide Financial Services with Original Maturity of:

One Year or More 1,629 50 815 100 815 Less Than One Year or Can Be Cancelled at Any Time 1,617 - - - -

Market Related Contracts (Current Exposure):Foreign Exchange Contracts 4,211 5 222 37 82Interest Rate Contracts 2,002 3 66 29 19

Total Off Balance Sheet Exposures 916Total Risk Weighted Exposures 7,260

Registered Bank

54




As at 30 June 2008



Balance Sheet ExposuresCash and Short Term Claims on Government 499 - - Claims on Banks 3,738 20 748Other 6,623 100 6,623Non-risk Weighted Assets 268 - - Total Balance Sheet Exposures 11,128 7,371

Credit Credit Average RiskPrincipal Conversion Equivalent Counterparty WeightedAmount Factor Amount Risk Weight Exposure


Off Balance Sheet ExposuresOther Commitments to Provide Financial Services with Original Maturity of:

One Year or More 1,763 50 881 100 881 Less Than One Year or Can Be Cancelled at Any Time 634 - - - -

Market Related Contracts (Current Exposure):Foreign Exchange Contracts 4,776 5 239 29 69Interest Rate Contracts 1,978 1 11 29 3

Total Off Balance Sheet Exposures 953


Registered Bank

55



RESIDENTIAL MORTGAGES BY LOAN-TO-VALUATION RATIO ("LVR")

$ millionsAs at 30 June 2009

LVR Range 0%-60% 60.1%-70% 70.1%-80% 80.1%-90% 90.1%-100% Total

Value of Exposures 13,680 7,843 13,665 5,196 1,984 42,368 32.3% 18.5% 32.2% 12.3% 4.7% 100%

Percentage of Exposures: With 100% LMI 0.7% 0.6% 0.9% 0.4% 0.1% 0.7% With top 20% LMI 3.5% 5.9% 6.3% 18.3% 23.4% 7.6%

MARKET RISK EXPOSURE

Exposures as at 30 JuneInterest Foreign Interest Foreign

Rate Currency Equity Rate Currency Equity$ millions Risk Risk Risk Risk Risk Risk

Implied Risk-weighted Exposure 1,913 8 44 2,313 213 36

Notional Capital Charge 153 1 3 185 17 3

0.4% - - 0.7% 0.1% -

Interest Foreign Interest ForeignRate Currency Equity Rate Currency Equity

$ millions Risk Risk Risk Risk Risk Risk

Implied Risk-weighted Exposure 2,755 25 51 2,613 350 38

Notional Capital Charge 220 2 4 209 28 3

0.6% - - 0.8% 0.1% -

CAPITAL ADEQUACY OF OVERSEAS BANK

2009

Under the advanced accreditation the Overseas Banking Group is required to disclose additional information on a quarterly and a semi-annual basis. This information is made available to users via the Overseas Bank's website (www.commbank.com.au), with the aim of allowing the market to better assess the Overseas Banking Group’s risk and reward assessment process.

2009 2008

The Overseas Bank is CBA. The Overseas Banking Group is CBA and the various companies and other worldwide entities owned and controlled by CBA.

Peak Exposures for Three Months ended 30 June

In December 2007 the Australian Prudential Regulation Authority ("APRA") granted "advanced" Basel II accreditation to the Overseas Banking Group. As a result of the accreditation, the advanced internal ratings based approach ("AIRB") for credit risk and the advanced measurement approaches ("AMA") for operational risk have been adopted in the calculation of the Overseas Banking Group's Risk Weighted Exposures from 1 January 2008. Under New Zealand regulations, this methodology is referred to as Basel II (internal models based) approach.

Banking Group

The Overseas Banking Group was also granted advanced accreditation for interest rate risk in the banking book ("IRRBB") in June 2008, with the accreditation taking effect from 1 July 2008.

2008

Notional Capital Charge as a % of Overseas Banking Group's Balance Date Equity

Notional Capital Charge as a % of Overseas Banking Group's Balance Date Equity

Banking Group

Expressed as a Percentage of Total Exposures

LVR data has been derived in accordance with the RBNZ Capital Adequacy Framework The Standardised Approach (BS2A). Exposures comprise Balance Sheet claims secured by residential mortgages and undrawn commitments that when drawn down will be secured by mortgage over residential property.

Certain loans within the above table are insured by third parties. Exposures with Lender's Mortgage Insurance ("LMI") within each LVR range are set out below.

Market Risk Exposures have been prepared on the basis of actual exposures derived in accordance with the process prescribed by the RBNZ under the document Market Risk Guidance Notes (BS6). The Market Risk Methodology is intended to attribute a dollar value amount to the market risk to which a registered bank is exposed.

Banking Group

56



CAPITAL ADEQUACY OF OVERSEAS BANK (continued)

$ millions Basel II Basel II Basel II Basel IIAs at 30 June 2009 2008 2009 2008

Tier One Capital as a % of Risk Weighted Exposures 8.8% 8.4% 8.1% 8.2%Minimum Tier One Capital (%) required by APRA 4.0% 4.0% 4.0% 4.0%

Total Capital as a % of Risk Weighted Exposures 10.5% 10.3% 10.4% 11.6%Minimum Total Capital (%) required by APRA 8.0% 8.0% 8.0% 8.0%

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

Securitisation, Funds Management and Other Fiduciary Activities

Insurance Business, Marketing and Distribution of Insurance Products

Risk Management

>

>

–––

>

>–––

>

Funds Under Management issued by ASB Group Investments Limited and distributed by ASB Group (Life) Limited, a fellow subsidiary of CBA, totalled $2,360m as at 30 June 2009.

The Banking Group does not conduct any insurance business. However, general and life insurance products are marketed through ASB Bank Limited's branch network. The life insurance products are underwritten by Sovereign Assurance Company Limited, a wholly owned subsidiary of ASB Group (Life) Limited.

Application forms for funds management products contain acknowledgements to be signed by a purchaser which are consistent with the disclosures for funds management products noted above.

Application forms for insurance products contain acknowledgements to be signed by a purchaser which are consistent with the disclosures for insurance products noted above.

the policies do not represent deposits or other liabilities of ASB Bank Limited or its subsidiaries;the policies are subject to investment risk, including possible loss of income and principal; andASB Bank Limited and its subsidiaries do not guarantee the capital value or performance of the policies.

that the securities are subject to investment risk including possible loss of income and principal invested; andthat ASB Bank Limited does not guarantee the capital value or performance of the securities.

The Banking Group provides limited custodial services relating to holding interest bearing instruments and equity securities on behalf of clients.

ASB Bank Limited markets and distributes Funds Management products which are issued by its wholly owned subsidiary ASB Group Investments Limited (refer to Note 17). Funds Under Management distributed by ASB Bank Limited totalled $2,092m as at 30 June 2009 (30 June 2008 $1,900m). ASB Bank Limited provides banking services for trusts managed or administered by ASB Group Investments Limited and sells financial assets to some of the trusts.

that the securities do not represent deposits or other liabilities of ASB Bank Limited;Prospectuses, investment statements and brochures for funds management products include disclosures:

The Banking Group has in place policies and procedures to ensure that the activities identified above are conducted in an appropriate manner. Should adverse conditions arise, it is considered that these policies and procedures will minimise the possibility that these conditions will adversely impact the Banking Group. The policies and procedures include comprehensive and prominent disclosure of information regarding products, and formal and regular review of operations and policies by management and auditors.

In addition, the following measures have been taken to manage any risk to ASB Bank Limited of marketing and distributing insurance products:Investment statements, prospectuses and brochures for insurance products include disclosures that ASB Bank Limited and its subsidiaries do not guarantee the insurer, nor the insurer's subsidiaries, nor any of the products issued by the insurer or the insurer's subsidiaries.Where the insurance products are subject to the Securities Act 1978, investment statements, prospectuses and brochures additionally include disclosures that:

In addition, the following measures have been taken to manage any risk to ASB Bank Limited of marketing and distributing fund management products:

During the year ended 30 June 2009 ASB Bank Limited established an in house RMBS facility, which can issue securities that are eligible for use as collateral for borrowing from the RBNZ. As at 30 June 2009 ASB Bank Limited had internally securitised $4.1b of RMBS through the Medallion NZ Series Trust 2009-1R of which $4.0b Class A floating rate notes issued by the Medallion NZ Series Trust 2009-1R have been assigned a rating of AAA by Fitch Ratings. The securitised assets remain on the Banking Group's Balance Sheet, as ASB Bank Limited retains a continuing involvement in the transferred assets (funding, liquidity and credit risk remains with ASB Bank Limited). The transaction does not have any impact on the Consolidated financial statements of the Banking Group.

Overseas Bank Overseas Banking Group

The Overseas Bank and the Overseas Banking Group's Capital Ratios throughout the 2008 and 2009 financial years exceeded both APRA minimum capital adequacy requirements.

57


44 Financial Reporting by Segments

$ millions Retail

Banking Relationship

Banking

Treasury and Financial Markets

Customer Markets and

Products Services and

Support Unallocated Total

Primary Segment Information: Business

As at 30 June 2009

Total Operating Income 627 410 289 168 30 - 1,524Net Profit before Taxation 366 118 271 22 (197) - 580

Total Assets 27,187 24,854 12,293 7,290 313 119 72,056Total Liabilities 22,213 7,875 37,780 703 60 - 68,631

34 8 8 7 10 - 67Depreciation and Amortisation Expense 12 4 - 8 34 - 58

As at 30 June 2008

Total Operating Income 549 375 305 107 14 - 1,350Net Profit before Taxation 378 272 287 10 (239) - 708

Total Assets 26,008 24,115 8,819 7,097 210 74 66,323Total Liabilities 20,490 7,508 33,957 731 32 195 62,913

35 8 1 7 19 - 70Depreciation and Amortisation Expense 9 3 1 6 29 - 48

Secondary Segment Information: Geographical

Banking Group

Acquisition of Property, Plant andEquipment and Intangible Assets

The Relationship Banking Segment provides services to commercial, business, corporate, institutional and rural customers.

The Treasury and Financial Markets Segment incorporates transactions booked through ASB Bank Limited's Treasury and Financial Markets Division, including financial instruments trading, foreign currency transactions, debt issues and Certificates of Deposit, and structured financing.

The Retail Banking Segment provides services to private individuals. Its range of products includes loans and deposits, current accounts and credit cards.

Acquisition of Property, Plant andEquipment and Intangible Assets

Retail Banking:

Relationship Banking:Treasury and Financial Markets:

Customers, Markets and Products:

The Customer, Markets and Products Segment develops and manufactures products and services that are distrubuted by the Retail and Relationship Banking Segments.

The Banking Group operates predominantly in the banking industry within New Zealand. The Banking Group has very limited exposure to risks associated with operating in different economic environments or political conditions. On this basis no geographical segment information is provided.

Operating Income in each segment includes transfer pricing adjustments to reflect intersegment funding arrangements. Intersegment pricing is determined on an arm's length basis. Charges are eliminated within the Banking Group.

Unallocated: Income Tax Assets and Liabilities.

Services and Support: The Services and Support Segment supplies strategic support and services to the other Segments.

58


45 Risk Management Policies

Introduction

CREDIT RISK

MARKET RISK

Traded Market Risk

VaR at 97.5% confidence level

$ millions 30-Jun-09 30-Jun-08

Interest Rate Risk 0.62 0.69Exchange Rate Risk 0.22 0.16Diversification Benefit (0.09) (0.11)

Total Market Risk 0.75 0.74

Average VaR

The Banking Group is committed to the management of risk to achieve sustainability of service, employment and profits, and therefore, takes on controlled amounts of risk when considered appropriate. The risk management framework identifies, assesses, manages and reports risk and risk adjusted returns using an economic equity framework. This is targeted at ensuring that the Banking Group has sufficient capital to maintain a string credit rating relative to the market and its peers.

The risk management strategy of ASB Bank Limited is set by its Board of Directors through the Board Audit and Risk Committee. All non-executive Directors are members of the Board Audit and Risk Committee. A formal executive committee is in place governing all risk types (Credit, Market, Operational and Strategic). The Chief Risk Officer is responsible for implementation of risk management strategy and all Executives have responsibility for the day to day management of risk across ASB Bank Limited.

The Banking Group has management structures and information systems to manage individual risks. Risk initiation and monitoring tasks are separated where feasible, and all material systems are subjected to regular internal audit. Periodic reviews of all risk management systems are undertaken by internal audit.

The Banking Group's external auditor also reviews parts of the Banking Group's risk management framework that impact on significant aspects of the financial systems, but only to the extent necessary to form their review on the Banking Group's six monthly results or audit opinion on the Banking Group's annual results.

The primary risks are those of credit, market (interest rate, price, foreign exchange), liquidity / funding, operational and strategic business risk.

CBA has in place an integrated risk management framework to identify, assess, manage and report risks and risk adjusted returns on a consistent and reliable basis. This framework is applied by the Registered Bank and is consistent with the risk management framework of ASB Bank Limited. The components of the framework are made up of credit, market, operational and strategic business and insurance risk.

Management and governance of ASB Bank Limited and its subsidiaries is separate to the Registered Bank. Although these policies are consistent, their execution is undertaken by separate management and governance.

Credit risk is the potential risk for loss arising from failure of a debtor or counterparty to meet their contractual obligations.

Refer to Note 16 for detailed disclosures on the Banking Group’s credit risk management policies.

The following table provides a summary of VaR by risk type for the trading book.

The following sections describe the risk management framework components.

Market risk arises from reprice and maturity mismatches between assets and liabilities, differences in their respective interest rates and how they respond to changing rates, both on and off balance sheet, as well as from controlled trading undertaken in pursuit of profit. The Banking Group is exposed to diverse financial markets including interest rates, foreign currencies, equities and commodities, and transacts in both physical and derivative instruments.

The Board of ASB Bank Limited sets limits on the value of market risk from market price movements that may be accepted. Specific limits are set forTreasury and Financial Markets trading activities, and for ASB Bank Limited's balance sheet management. Adherence to limits is monitored by an independent risk unit under the Chief Risk Officer.

For the purposes of market risk management, ASB Bank Limited makes a distinction between traded and non-traded market risks. Traded market risk covers market risk arising from trading activity. Non-traded market risk covers market risks related to balance sheet management on customer loan and deposit activities, which is predominantly interest rate risk.

Details of the Banking Group’s policies for management of market risk are set out below.

ASB Bank Limited uses Value-at-Risk ("VaR") models as the principal measure of market risk in both the traded and non-traded portfolios. Because of inherent limitations in VaR, for example the VaR model cannot encompass all possible outcomes, tests covering a variety of stress scenarios are regularly performed to simulate the effect of extreme market conditions.

From 1 May 2009 ASB Bank Limited's organisation design was restructured to consolidate risk and control functions under a Chief Risk Officer, reporting to the Chief Executive Officer.

Market risk is the risk that movements in the level or volatility of market rates and prices will affect the Banking Group's income or the value of its holdings of financial instruments.

For trading activities VaR is used to capture interest rate, exchange rate, volatility, equity and commodities risk. VaR is calculated using a historic simulation model with 520 days of data over a one day holding period, at a 97.5% confidence interval.

The model does not capture VaR due to credit spread changes. In addition as VaR does not produce a maximum loss, stress testing of the trading book is carried out and reported on a weekly basis. Stress tests capture a range of scenarios plus the VaR basis on five years of price data.

59


45 Risk Management Policies (continued)

(a)

Percentage of NIE 30-Jun-09 30-Jun-08

Exposure at End of Year 0.68% 2.10%Past 12 Month Exposure - Average 1.32% 0.98%Past 12 Month Exposure - High 2.62% 2.11%Past 12 Month Exposure - Low 0.43% 0.27%

(b) Economic VaR

$ millions 30-Jun-09 30-Jun-08

Exposure at End of Year 0.7 3.8 Past 12 Month VaR (97.5 percentile) - Average 1.7 4.0 Past 12 Month VaR (97.5 percentile) - High 4.7 6.5 Past 12 Month VaR (97.5 percentile) - Low 0.4 2.2

The figures in the following table represent the net present value of the expected change in the Banking Group’s customer and hedging activityfuture earnings due to interest rate change calculated to a 97.5% percentile basis for the remaining term of all existing Banking Book assets andliabilities.

The Banking Group reduces interest rate risk by seeking to match the repricing characteristics of its assets and liabilities, by changing the mix of assets and liabilities through marketing and pricing initiatives, by buying and selling long term securities, and through the use of derivatives such as interest rate swaps and forward rate agreements.

The earnings sensitivity to interest rate changes must be such that expected net interest earnings under different interest rate scenarios remain within a set percentage of the central forecast and, similarly, value sensitivity to expected maximum market value changes remain within a set percentage of capital. These limits are set by the Board of Directors and are monitored by the Risk and Control Committee monthly. The methods of calculating exposures under these limits are discussed in more detail below.

Next 12 Months' EarningsThe risk to the net interest earnings ("NIE") of the Banking Book over the next 12 months for a change in interest rates is measured on a monthlybasis. Risk is measured assuming an immediate 1% parallel movement in interest rates across the whole yield curve. Potential variations in NIEare measured using a simulation model that takes into account the projected change in Balance Sheet asset and liability levels and mix. Assetsand liabilities with pricing directly based on market rates are repriced based on the full extent of the rate shock that is applied. Risk on the otherassets and liabilities (those priced at the discretion of the Banking Group) is measured by taking into account both the manner in which theproducts have repriced in the past, and the full 1% change in price.

The figures in the following table express current and historic exposure of a 1% parallel shock to NIE as a percentage of average forecast NIE fora 12 month period.

Non-traded Market Risk - Interest Rate Risk in the Banking BookASB Bank Limited manages all non-traded market risk for the Banking Group, which covers all non-traded products (the Banking Book).

Some of the Banking Group’s customer loan and deposit assets and liabilities have interest rate risk that is not fully captured within a measure ofrisk to the next 12 months earnings. To measure this longer term value sensitivity, the Banking Group utilises an economic VaR analysis. Thisanalysis measures the potential change in the net present value of cash flows of customer and hedging assets and liabilities. Cash flows for fixedrate products are included on a contractual basis. Cash flows for products repriced at the discretion of the Banking Group are based on theexpected repricing characteristics of those products.

Total cash flows are revalued under a range of possible interest rate scenarios using a historical simulation VaR methodology. The interest ratescenarios are based on actual interest rate movements that have occurred over a six year historical observation period. The measured VaRexposure is an estimate to a 97.5% confidence level (one-tail) of the potential loss that could occur if the Balance Sheet positions were to be heldunchanged for a one month holding period. For example, VaR exposure of $1m means that in 97.5 cases out of 100, the expected net presentvalue will not decrease by more than $1m given the historical movement in interest rates.

Regular simulation of future net interest earnings are estimated employing existing interest rates, current and forecast Balance Sheets, and rate shocks of 1, 2, and 3% above and below current levels. Market Value sensitivity is modelled using VaR historical rate analysis. The Banking Group manages the known and assumed repricing characteristics of its assets and liabilities as well as future commitments to put the Banking Group in a position to benefit from anticipated interest rate movements and to limit the risk of adverse interest rate movements.

Where derivative transactions are used, cash flow hedges are used to manage the risk of the potential for a change in interest rates to change net interest earnings, in the current reporting period and in future years, and fair value hedges are used to manage the risk of potential for a change in interest rates to cause a fluctuation in the fair value of financial instruments.

The Banking Group's objective for managing non-traded market risk is set out in ASB Bank Limited's Board approved Non-Traded Market Risk Policy, and is to deliver consistent and enhanced net interest earnings over time. Oversight and strategic direction is provided by the Executive Leadership Team Risk and Control Committee which meets monthly. On a day to day basis, interest rate risk is measured and monitored by an independent risk team, and managed within the Bank's Treasury and Financial Markets Division.

Interest rate risk arises from the structure and characteristics of the Bank's assets, liabilities and equity and their respective interest rates. Determining reprice gap profiles is a core function in identifying risk, and Treasury gap limits provide day to day risk measures. In addition to this, regular simulation of Banking Group activity and analysis of expected maximum changes in market value as a percentage of capital provide key risk sensitivity management information and incorporate other non-gap risk causes of interest rate risk including basis risk and optionality. These simulations are measured against earnings and value sensitivity limits.

60



Interest Rate Repricing Schedule

Within Between Between Between Over Non-6 6-12 1-2 2-5 5 interest

$ millions Months Months Years Years Years Bearing Total

As at 30 June 2009

AssetsCash and Call Deposits with the Central Bank 1,439 - - - - 143 1,582Due from Other Banks 1,258 - - - - - 1,258Money Market Advances 159 - - - - - 159Securities 5,335 57 812 453 73 43 6,773Derivative Assets - - - - - 2,517 2,517Advances to Customers 35,392 6,576 8,369 8,815 17 (323) 58,846Other Assets - - - - - 921 921Total Assets 43,583 6,633 9,181 9,268 90 3,301 72,056

LiabilitiesDue to Other Banks 8,106 745 - - - - 8,851Money Market Deposits 17,559 910 925 975 301 - 20,670Derivative Liabilities - - - - - 4,239 4,239Deposits from Customers 22,686 3,382 1,660 416 - 1,834 29,978Other Liabilities - - - - - 450 450Subordinated Debt 1,699 - 200 370 1,895 279 4,443Total Liabilities 50,050 5,037 2,785 1,761 2,196 6,802 68,631

Lending Commitments (100) 128 402 349 36Net Derivative Notional Principals 9,749 (2,307) (4,773) (4,641) 1,972

As at 30 June 2008

AssetsCash and Call Deposits with the Central Bank 1,076 - - - - 79 1,155Due from Other Banks 637 - - - - - 637Money Market Advances 1,168 38 8 8 1 - 1,223Securities 2,920 566 851 922 89 54 5,402Derivative Assets - - - - - 1,249 1,249Advances to Customers 25,870 7,693 10,775 11,503 54 (122) 55,773Other Assets - - - - - 884 884Total Assets 31,671 8,297 11,634 12,433 144 2,144 66,323

LiabilitiesDue to Other Banks 7,800 - - - - - 7,800Money Market Deposits 16,358 1,590 1,009 940 10 133 20,040Derivative Liabilities - - - - - 1,193 1,193Deposits from Customers 22,499 2,874 457 272 - 1,719 27,821Other Liabilities - - - - - 930 930Subordinated Debt 2,698 - - 570 1,712 149 5,129Total Liabilities 49,355 4,464 1,466 1,782 1,722 4,124 62,913

Lending Commitments (87) 77 494 234 27Net Derivative Notional Principals 19,303 (3,446) (8,517) (8,760) 1,421

The following tables include the Banking Group's assets and liabilities at their carrying amounts, categorised by the earlier of contractual repricing or maturity dates. The carrying amounts of derivative financial instruments, which are principally used to reduce the Banking Group's exposure to interest rate movements, are included under the heading "Non-interest Bearing".

Banking Group

61



Interest Rate Repricing Schedule (continued)

Within Between Between Between Over Non-6 6-12 1-2 2-5 5 interest

$ millions Months Months Years Years Years Bearing Total

As at 30 June 2009

AssetsCash and Call Deposits with the Central Bank 44 - - - - - 44Due from Other Banks 3,250 - - - - - 3,250Securities 597 - - - - - 597Derivative Assets - - - - - 308 308Advances to Customers 5,687 3 6 10 4 (62) 5,648Other Assets - - - - - 50 50Total Assets 9,578 3 6 10 4 296 9,897

LiabilitiesDue to Other Banks 5,262 - - - - - 5,262Derivative Liabilities - - - - - 151 151Deposits from Customers 286 110 - - - - 396Other Liabilities - - - - - 21 21Subordinated Debt 1,449 - - - 1,892 241 3,582Total Liabilities 6,997 110 - - 1,892 413 9,412

Net Derivative Notional Principals (1,838) (1) (5) (9) 1,853

As at 30 June 2008

AssetsCash and Call Deposits with the Central Bank 59 - - - - - 59Due from Other Banks 3,738 - - - - - 3,738Securities 440 - - - - - 440Derivative Assets - - - - - 268 268Advances to Customers 6,489 3 4 5 42 (13) 6,530Other Assets - - - - - 93 93Total Assets 10,726 3 4 5 42 348 11,128

LiabilitiesDue to Other Banks 5,341 - - - - - 5,341Derivative Liabilities - - - - - 450 450Deposits from Customers 846 5 - - - - 851Other Liabilities - - - - - 78 78Subordinated Debt 2,313 - - - 1,712 111 4,136Total Liabilities 8,500 5 - - 1,712 639 10,856

Net Derivative Notional Principals (665) - (3) (3) 671

Registered Bank

62



Price Risk

Material Foreign Currency Balances

Net Open Net OpenExchange Assets Liabilities Position Assets Liabilities Position

Rate NZ $m NZ $m NZ $m NZ $m NZ $m NZ $m

As at 30 June 2009

US Dollar 0.6516 1,642 10,069 - 266 2,204 - Australian Dollar 0.8050 67 4,322 7 38 1,497 - Sterling 0.3918 6 1,358 1 - - - Japanese Yen 62.3976 10 719 (1) - - - EURO 0.4619 479 2,393 (1) 19 19 - Canadian Dollar 0.7536 136 78 - - - - Swiss Franc 0.7048 - 1,231 (2) - - -

As at 30 June 2008

US Dollar 0.7630 947 10,843 3 264 1,902 - 0.7929 487 5,447 (2) 447 2,864 -

Sterling 0.3827 7 1,104 - - - - Japanese Yen 80.9407 495 981 (209) 2 2 - EURO 0.4833 641 2,287 - 70 70 - Canadian Dollar 0.7702 56 38 - - - - Swiss Franc 0.7765 2 989 - - - -

Equity Risk

Equity risk results from the change in market prices of equity investments held by the Banking Group. This is not a material risk to the Banking Group.A formal equity risk policy approved by the Board Audit and Risk Committee of ASB Bank Limited is in place. The Registered Bank has no exposure to equity risk.

Australian Dollar

Differences between total monetary assets and total monetary liabilities in individual currencies are covered by contracts with other parties and / or are controlled within internal policy limits.


Price risk for both ASB Bank Limited and CBA is the risk that the value of a financial instrument will fluctuate as a result of changes in market prices, whether those changes are caused by factors specific to the individual instrument or its issuer, or factors affecting all instruments of a specific type traded in the market.

Material assets and liabilities denominated in foreign currencies recognised in these financial statements, and Net Open Positions are presented in the tables below:

ASB Bank Limited monitors and manages this risk through its Treasury and Financial Markets Division. Mismatches are reported daily. Limits based on VaR and outright positions, both intra-day and overnight, are set to ensure that the maximum exposure to losses from an adverse movement in exchange rates is known to agreed statistical confidence levels.

Adherence to limits is monitored by an independent department under the Chief Risk Officer within ASB Bank Limited and separately for the Registered Bank.

Price risk is controlled by ensuring a diverse range of investments, limits on counterparty exposure and restrictions on types of instruments.

Foreign Exchange Risk

Foreign exchange risk is the risk to earnings and value caused by a change in foreign exchange rates.

Foreign exchange mismatches can arise from the day-to-day purchase and sale of foreign currency, from trading positions taken, from deposit and lending activity in foreign currencies and from offshore funding by the Banking Group.

63



>>>

As at 30 June 2009 2008$ millions

CORE LIQUID ASSETSQualifying Liquid AssetsCash 142 65 Balances with the Central Bank 1,439 1,090 Treasury Bills 2,426 738 Government Bonds 509 64 Bank Bills Prime 1,918 1,800 Other Qualifying Liquid Assets 1,369 2,613 Total Qualifying Liquid Assets 7,803 6,370

Retail Mortgage Backed Securities 3,755 -

Total Core Liquid Assets 11,558 6,370

Total Qualifying Liquid Assets Expressed as a Percentage of Total General Liabilities 13.11% 11.44%

Qualifying liquid assets are of high credit quality and include short term cash held with the RBNZ or other banks, government securities and other securities that are readily acceptable in Repurchase agreements with the RBNZ and other New Zealand banks, prime corporate bonds and short term paper and assets issued by offshore Supranationals and highly rated banks.

Ensure all financial obligations are met when due;Provide adequate protection, even under crisis scenarios at lowest cost; and Achieve sustainable, lowest-cost funding within the limitations of funding diversification requirements.

The Banking Group's key liquidity measures are described below:

During the year ended 30 June 2009 ASB Bank Limited established an in house RMBS facility, which can issue securities that can be used as collateral for borrowing from the RBNZ. As at 30 June 2009 ASB Bank Limited had internally securitised $4.1b of RMBS through the Medallion NZ Series Trust 2009-1R, of which $4.0b of Class A floating rate notes have been assigned a rating of AAA by Fitch Ratings and are eligible for acceptance by the RBNZ. Whilst not intended to be used for day to day liquidity management, the RMBS form part of ASB Bank Limited's Total Core Liquid Assets. As at 30 June 2009 $245m of RMBS had been used as collateral for repurchase agreements with the RBNZ (refer to Notes 15 and 22).

LIQUIDITY/FUNDING RISK

The table below shows the key liquidity measures as at the end of the year.

Run Off Risk is calculated based on estimates of investor behaviour in a crisis scenario. Funding is weighted to reflect the sensitivity of different classes of investor during the first five days of a run. It is difficult to predict accurately how investors will behave if a bank gets into difficulties. Based on observations globally wholesale investors will act quickest by withdrawing funds whilst retail investors will be slower to withdraw funds. Interbank funding maturing in the next five days is therefore weighted at 100%, with a lesser weights being applied to differing investor groups falling to 5% for some retail funds. Additional liquid asset requirements are added to allow for undrawn commitments to lend based upon the likelihood of drawdown.

ASB Bank Limited and the Registered Bank monitor liquidity risk primarily by forecasting future daily cash requirements. To provide for any unexpected patterns in cash movements, ASB Bank Limited and the Registered Bank hold a pool of readily tradable investment assets and deposits with high credit quality counterparties, on call or maturing within seven days. They also seek a diverse and stable funding base.

Limits are set to ensure that holdings of liquid assets do not fall below prudent levels. Limits are also set on the level of interbank and offshore funding, as well as on the amount of wholesale funding that may mature in any period.

ASB Bank Limited and the Registered Bank's methodology requires that qualifying liquid assets are greater than the Run Off Risk of funding and commitments, with a minimum holding of qualifying liquid assets of 10% of General Liabilities (Total Funding excluding Subordinated Debt).

Liquidity risk is the potential for the Banking Group to encounter difficulty meeting its financial obligations as they fall due. Policies are in place to manage liquidity on a day-to-day basis, and also under crisis scenarios.

The objectives of the Banking Group’s funding and liquidity policies are to :

64



Within Between Between Between OverAt 6 6-12 1-2 2-5 5 Carrying

$ millions Call Months Months Years Years Years Total Value

As at 30 June 2009

Financial AssetsCash and Call Deposits with the Central Bank 1,582 - - - - - 1,582 1,582Due from Other Banks 1,153 107 - - - - 1,260 1,258Money Market Advances 86 73 - - - - 159 159Securities - 5,397 102 837 440 263 7,039 6,773Derivative Assets - 1,490 6 (48) 33 1,449 2,930 2,517Advances to Customers 1,960 15,648 1,999 5,556 11,604 55,926 92,693 58,846Other Assets - 8 43 3 13 - 67 254Total Financial Assets 4,781 22,723 2,150 6,348 12,090 57,638 105,730 71,389

Financial LiabilitiesDue to Other Banks 669 4,686 928 1,521 802 625 9,231 8,851Money Market Deposits 1,748 13,361 1,967 1,277 2,370 12 20,735 20,670Derivative Liabilities - 2,154 93 149 59 2,288 4,743 4,239Deposits from Customers 13,359 10,845 3,922 1,729 434 - 30,289 29,978Other Liabilities 34 22 99 - 2 - 157 450Subordinated Debt - 54 54 410 886 5,605 7,009 4,443Total Financial Liabilities 15,810 31,122 7,063 5,086 4,553 8,530 72,164 68,631

As at 30 June 2008

Financial AssetsCash and Call Deposits with the Central Bank 1,155 - - - - - 1,155 1,155Due from Other Banks 44 600 - - - - 644 637Money Market Advances 43 1,132 39 10 10 - 1,234 1,223Securities - 2,864 685 1,042 1,150 534 6,275 5,402Derivative Assets - 949 36 54 53 - 1,092 1,249Advances to Customers 2,159 13,496 2,039 5,437 11,359 59,368 93,858 55,773Other Assets - 71 2 - - - 73 320Total Financial Assets 3,401 19,112 2,801 6,543 12,572 59,902 104,331 65,759

Financial LiabilitiesDue to Other Banks 633 5,543 36 145 1,390 826 8,573 7,800Money Market Deposits 2,543 10,686 2,211 1,959 3,103 49 20,551 20,040Derivative Liabilities - 42 867 35 9 37 990 1,193Deposits from Customers 10,312 13,461 3,546 494 284 - 28,097 27,821Other Liabilities - 224 94 - - - 318 735Subordinated Debt - 87 245 333 1,268 8,563 10,496 5,129Total Financial Liabilities 13,488 30,043 6,999 2,966 6,054 9,475 69,025 62,718

Maturity Analysis for Undiscounted Contractual Cash flows

Banking Group

The tables below present the Banking Group’s cash flows by remaining contractual maturities as at balance date. The amounts disclosed in the tables are the contractual undiscounted cash flows and therefore will not agree to the carrying values on the Balance Sheet.

65



Within Between Between Between OverAt 6 6-12 1-2 2-5 5 Carrying

$ millions Call Months Months Years Years Years Total Value

As at 30 June 2009

Financial AssetsCash and Call Deposits with the Central Bank 44 - - - - - 44 44Due from Other Banks - 1,147 17 68 102 2,244 3,578 3,250Securities - 597 - - - - 597 597Derivative Assets - - - - - 1,449 1,449 308Advances to Customers 506 4,795 4 7 15 1 5,328 5,648Other Assets - - - - - - - 30Total Financial Assets 550 6,539 21 75 117 3,694 10,996 9,877

Financial LiabilitiesDue to Other Banks 4 4,023 707 224 16 399 5,373 5,262Derivative Liabilities - - - - - 1,918 1,918 151Deposits from Customers 125 161 110 - - - 396 396Other Liabilities - 2 - - - - 2 21Subordinated Debt - 38 38 153 229 5,599 6,057 3,582Total Financial Liabilities 129 4,224 855 377 245 7,916 13,746 9,412

As at 30 June 2008

Financial AssetsCash and Call Deposits with the Central Bank 59 - - - - - 59 59Due from Other Banks 9 817 915 184 276 2,833 5,034 3,738Securities - 440 - - - - 440 440Derivative Assets - 664 - - - - 664 268Advances to Customers 659 5,251 19 69 750 2 6,750 6,530Other Assets - - - - - - - 81Total Financial Assets 727 7,172 934 253 1,026 2,835 12,947 11,116

Financial LiabilitiesDue to Other Banks - 5,040 8 31 46 498 5,623 5,341Derivative Liabilities - - 860 - - 37 897 450Deposits from Customers - 160 17 49 74 3,046 3,346 851Other Liabilities - 2 - - - - 2 78Subordinated Debt - 66 66 265 397 8,159 8,953 4,136Total Financial Liabilities - 5,268 951 345 517 11,740 18,821 10,856

Registered Bank

Maturity Analysis for Undiscounted Contractual Cash flows (continued)

66



Deposits at Other Total Deposits at Other Total$ millions Fair Value Funding Funding Fair Value Funding Funding

As at 30 June 2009

Agricultural, Forestry and Fishing 22 570 592 - - - Government and Public Authorities 118 349 467 - 1 1Financial, Investments and Insurance 15,254 21,584 36,838 - 9,010 9,010Utilities 18 136 154 - 66 66Transport and Storage 12 86 98 - 10 10Personal 1,132 22,237 23,369 - - - Other Commercial and Industrial 417 2,007 2,424 - 153 153Total Funding by Industry 16,973 46,969 63,942 - 9,240 9,240

New Zealand 3,956 29,730 33,686 - 392 392Overseas 13,017 17,239 30,256 - 8,848 8,848Total Funding by Geographic Region 16,973 46,969 63,942 - 9,240 9,240

As at 30 June 2008

Agricultural, Forestry and Fishing 40 760 800 - - - Government and Public Authorities 368 301 669 - - - Financial, Investments and Insurance 13,685 20,740 34,425 - 10,206 10,206Utilities 38 88 126 - 2 2Transport and Storage 37 74 111 - - - Personal 1,410 20,866 22,276 - - - Other Commercial and Industrial 539 1,844 2,383 - 120 120Total Funding by Industry 16,117 44,673 60,790 - 10,328 10,328

New Zealand 4,339 31,043 35,382 - 216 216Overseas 11,778 13,630 25,408 - 10,112 10,112Total Funding by Geographic Region 16,117 44,673 60,790 - 10,328 10,328



Concentrations of Funding

The following tables present the Banking Group's Concentrations of Funding which are reported by industry and geographic region. Total Funding comprises Due to Other Banks, Money Market Deposits, Deposits from Customers and Subordinated Debt and is presented at its carrying value.

ANZSIC codes have been used as the basis for disclosing industry sectors.




67



Business Continuity Management

INTERNAL AUDIT

46 Events after the Balance Sheet Date

Operational Risk is defined as the risk of economic loss or gain resulting from inadequate or failed internal processes and methodologies, people, systems or external events.

Strategic Business Risk is defined as the risk of economic gain or loss resulting from changes in the business environment caused by economic, competitive, social trend or regulatory factors.

CBA maintains an independent Internal Audit function which is ultimately accountable to the CBA Board of Directors. CBA's Internal Audit performs a similar role for the Registered Bank to that of the ASB Bank Limited Internal Audit function.

Internal Audit provides independent opinions on the effectiveness of risk management systems, the framework of controls and governance processes within ASB Bank Limited's operations. Operational, compliance and systems audits of all areas of ASB Bank Limited's operations are undertaken based on an assessment of risk.

A comprehensive BCM programme including plan development, testing and education has been implemented across all business units and includesdisaster recovery planning.

Refer to Note 33 for details of Perpetual Preference Dividends payable to Minority Interests, declared after the balance sheet date.

There are no other events subsequent to the balance date which would materially affect the financial statements.

OPERATIONAL AND STRATEGIC BUSINESS RISK

The Board Audit and Risk Committee of ASB Bank Limited meets on a regular basis to consider ASB Bank Limited's financial reporting, internal control and corporate governance issues. It reviews the interim and annual financial statements, the activities of the internal and external auditors and monitors the relationship between management and the external auditors.

Each respective business manager of ASB Bank Limited and CBA is responsible for the identification and assessment of these risks and for maintaining appropriate internal controls, and is supported by the Banking Group's governance structures, operational risk frameworks and operational risk policies.

The Banking Group's operational risk measurement methodology combines expert assessment of individual risk exposures with internal loss data to determine potential losses and calculate operational risk economic capital.

Business Continuity Management ("BCM") within the Banking Group involves the development, maintenance and testing of action plans to respond to defined risk events. This ensures that business processes continue with minimal adverse impact on customers, staff, products, services and brands.

BCM constitutes an essential component of the Banking Group's risk management process by providing a controlled response to potential operational risks that could have a significant impact on the Banking Group's critical processes and revenue streams. It includes both cost-effective responses to mitigate the impact of risk events or disasters and crisis management plans to respond to crisis events.

ASB Bank Limited maintains an independent Internal Audit function which is ultimately accountable to the Board of Directors through the Board Audit and Risk Committee.

68


30 June 2009For the year ended

COMMONWEALTH BANK OF AUSTRALIANEW ZEALAND OPERATIONS

PART B

NEW ZEALAND LIFE INSURANCE GROUP

Contents

1 - 4 General Disclosures5 Historical Summary of Aggregated Financial Statements6 Income Statement6 Statement of Recognised Income and Expense7 Balance Sheet

8 - 9 Cash Flow Statement10 - 53 Notes to the Financial Statements10 - 18 1 Statement of Accounting Policies19 - 20 2 Discontinued Operations21 - 22 3 Actuarial Policies and Methods

23 4 Net Profit After Taxation23 5 Premium Income23 6 Reinsurance24 7 Investment Income24 8 Other Income25 9 Claims, Surrenders and Maturities

25 - 26 10 Commission and Management Expenses26 11 Auditor's Remuneration27 12 Taxation27 13 Imputation and Policyholder Credit Accounts 28 14 Securities 29 15 Cash and Cash Equivalents

29 - 30 16 Derivative Financial Instruments30 17 Investments in Subsidiaries31 18 Property, Plant and Equipment

32 - 33 19 Intangible Assets33 20 Trade and Other Receivables

33 - 34 21 Other Assets35 22 Life Insurance Contract Liabilities and Life Investment Contracts36 23 Reinsurance Assets and Liabilities36 24 Deferred Taxation Liability37 25 Borrowings37 26 Trade and Other Payables

37 - 38 27 Provisions38 28 Contributed Capital - Ordinary Shareholder38 29 Contributed Capital - Convertible Notes38 30 Retained Earnings 38 31 Head Office Contribution

38 - 39 32 Capital Management40 - 41 33 Related Party Transactions and Balances

41 34 Directors and Key Management Personnel41 35 Leasing Commitments41 36 Contingent Liabilities and Capital Commitments

42 - 43 37 Financial Reporting by Segments43 38 Interest Rate Summary43 39 Fair Value of Financial Instruments not Carried at Fair Value44 40 Asset Quality45 41 Provisions for Impairment Loss45 42 Disaggregated Information

46 - 48 43 Risk Management Policies49 - 50 44 Sensitivity Analysis50 - 51 45 Material Foreign Currency Balances

51 46 Concentrations of Credit Exposures by Geographic Region52 47 Maturity Analysis of Financial Liabilities53 48 Concentration of Credit Exposures by Individual Counterparties53 49 Events After Balance Date

Commonwealth Bank of Australia New Zealand Life Insurance Group

GENERAL MATTERS

1.0

Commonwealth Bank of Australia New Zealand Branch Level 21, ASB Bank Centre 135 Albert StreetAucklandNew Zealand

2.0 Overseas Bank and Address for Service

Commonwealth Bank of AustraliaLevel 748 Martin PlaceSydneyAustralia

3.0 Guarantee Arrangements

3.1

4.0 Directors and the New Zealand Chief Executive Officer

There have been no changes to Directors since the 31 March 2009 General Short Form Disclosure Statement was signed.

The Life Group has not published a supplementary disclosure statement because none of the information required to be disclosed applies to the Life Group.

The Overseas Bank is the Commonwealth Bank of Australia, domiciled in Australia. The Overseas Banking Group is the Commonwealth Bank of Australia including subsidiary activities worldwide.

The Commonwealth Bank of Australia (the "CBA") operates as a public company under the Corporations Act in Australia. It has share capital and is governed by a constitution. The CBA was converted from a statutory corporation to a public company on 17 April 1991.

The CBA Group provides a wide range of banking, financial and related services including funds management and life and general insurance. The origins of the Bank lie in the former Commonwealth Bank of Australia which was established in 1911 by an Act of Parliament to conduct commercial and savings bank functions. These functions were gradually expanded under continued Government ownership until September 1991 when the Bank was partially privatised. In July 1996 the Commonwealth Government sold its remaining shareholding in the Bank.

Guarantee Arrangements are outlined in Part A Commonwealth Bank of Australia New Zealand Banking Group (the "Banking Group") General Disclosure Statement, 4.0.

General Disclosure Statement

This document comprises the disclosures for the Commonwealth Bank of Australia New Zealand Life Insurance Group (the "Life Group") of the Commonwealth Bank of Australia New Zealand Operations (the "CBA NZ Operations") as at 30 June 2009. This information is published where applicable, in accordance with the Registered Bank Disclosure Statement (Full and Half-Year Overseas Incorporated Registered Banks) Order 2008 and pursuant to section 81(1) of the Reserve Bank of New Zealand Act 1989.

This document should be read in conjunction with the disclosures for Commonwealth Bank of Australia New Zealand Banking Group (the "Banking Group") of the CBA NZ Operations.

A copy of the Commonwealth Bank of Australia's most recent published Financial Statements will be available immediately upon a request being made to the above address. A copy of the Financial Statements may also be obtained from the Commonwealth Bank of Australia's website (www.commbank.com.au) in the Shareholder Centre.

Registered Bank and Address for Service

1

4.1 NEW ZEALAND CHIEF EXECUTIVE OFFICER

Name A.J. (Andrew) Woodward, Head of Institutional Banking NZ CBAPrimary Occupation BANK EXECUTIVEResidence Auckland, New ZealandExternal Directorships Australian Banker's Association, Business Council of Australia and Financial Markets Foundation of Children

4.2 Directors of the Commonwealth Bank of Australia

EXECUTIVE DIRECTOR

Name Sir R.J. (Ralph) Norris DCNZM, FNZIM, FNZCS (Managing Director)

Primary Occupation CHIEF EXECUTIVE OFFICERResidence New South Wales, AustraliaExternal Directorships Nil

INDEPENDENT DIRECTORS

Name J.M. (John) Schubert, BE, PhD, Name C.R. (Colin) Galbraith, LLMFIE Aust, FTS, CP(Eng) (Chairman) LLB (Hons), AM

Primary Occupation COMPANY DIRECTOR Primary Occupation COMPANY DIRECTORResidence New South Wales, Australia Residence Victoria, AustraliaExternal Directorships G2 Therapies Limited, BHP Billiton Limited, External Directorships BHP Billiton Community Trust,

BHP Billiton Plc, Qantas Airways Limited, OneSteel Limited, Australian InstituteGreat Barrier Reef Foundation of Company Directors

Name J.S. (Jane) Hemstritch BSc, FCA, FCPA Name R.J. (Reg) Clairs AOPrimary Occupation COMPANY DIRECTOR Primary Occupation COMPANY DIRECTORResidence Victoria, Australia Residence Queensland, AustraliaExternal Directorships The Global Foundation, Tabcorp Limited External Directorships David Jones Limited

Name S.C.H. (Carolyn) Kay BA, LLB, FAICD Name F.D. (Fergus) Ryan Primary Occupation COMPANY DIRECTOR Primary Occupation COMPANY DIRECTORResidence New South Wales, Australia Residence Victoria, AustraliaExternal Directorships Brambles Industries Limited, External Directorships Australian Foundation Investment

Allens Arthur Robinson, Sydney Institute Company Limited, National AustraliaDay Council, National Library of Australia Centre for Social Impact

Name Sir J.A. (John) Anderson KBE Name H.H. (Harrison) YoungPrimary Occupation COMPANY DIRECTOR Primary Occupation COMPANY DIRECTORResidence Wellington, New Zealand Residence Victoria, AustraliaExternal Directorships Television New Zealand External Directorships Florey Neuroscience Institutes

Capital Coast District Health Board, Asia Society AustralAsia Centre and New Zealand Venture Investment Fund, Asia Link, Howard Florey Institute Hawke's Bay District Health Board Foundation, Financial Services

Volunteer Corps

Name D.J. (David) Turner FCA Name A.M. (Andrew) MohlPrimary Occupation COMPANY DIRECTOR Primary Occupation COMPANY DIRECTORResidence United Kingdom Residence New South Wales, AustraliaExternal Directorships Cobham plc External Directorship AMP Foundation, Export Finance and

Insurance Corporation

4.3 Responsible PersonIn Absence

C.J.S. (Charles) Pink S.B. (Stewart) McRobieManaging Director and Chief Executive Officer Chief Financial OfficerAuckland, New Zealand Auckland, New Zealand

5.0

6.0 Capital Adequacy - Overseas Bank and Overseas Banking Group

Information concerning Capital Adequacy of the Overseas Bank and Overseas Banking Group can be obtained from Part A Commonwealth Bank of Australia New Zealand Banking Group (the “Banking Group”) General Disclosure Statement, Note 42 Capital Adequacy of Overseas Bank on page 57.

Conditions of Registration - Commonwealth Bank of Australia New Zealand Branch (the "Registered Bank") as from 26November 2007.

Conditions of Registration of the Registered Bank are outlined in Part A Commonwealth Bank of Australia New Zealand Banking Group (the “Banking Group”) General Disclosure Statement, General Matters 6.0.

2

7.0 Credit Rating of Commonwealth Bank of Australia

7.1

Rating Agency

Fitch Ratings



7.2 Long Term Debt Rating Definitions

Fitch Moody's S&P(a) (b) (a)

Highest quality / Extremely strong capacity to pay interest and principal AAA Aaa AAAHigh quality / Very strong AA Aa AAUpper medium grade / Strong A A A

Medium grade (lowest investment grade) / Adequate BBB Baa BBBPredominantly speculative / Less near term vulnerability to default BB Ba BBSpeculative, low grade / Greater vulnerability B B B

Poor to default / Identifiable vulnerability CCC Caa CCCHighest speculations CC Ca CCLowest quality, no interest C C C

In payment default, in arrears - questionable value D - D

7.3

A+

7.4 Insurer's Financial Strength Rating Definitions

Superior ability to meet their ongoing obligations to policyholders

Excellent ability to meet their ongoing obligations to policyholders

Good ability to meet their ongoing obligations to policyholders

Fair ability to meet their ongoing obligations to policyholders

Marginal ability to meet their ongoing obligations to policyholders

Weak ability to meet their ongoing obligations to policyholders

Poor ability to meet their ongoing obligations to policyholders

Current Long Term Rating

AA

AA

Aa1

As at the date of the signing of this General Disclosure Statement, the following rating was assigned to Sovereign Assurance Company Limited's ability to meet its ongoing obligations to policyholders:

D

The A.M. Best Financial Strength rating was upgraded on 28 December 2007.

Rating Agency Current Long Term Rating

A.M. Best Financial Strength Rating

B++,B+

B,B-

C++,C+

C, C-

Insurer's Financial Strength Rating Definition A.M. Best Financial Strength Rating

A++, A+

A, A-

(b) Moody's applies numeric modifiers to each generic rating category from Aa to B, indicating that the counterparty is (1) in the higher end of its letter-rating category, (2) in mid-range and (3) in lower end.

Long Term Debt Rating

(a) Fitch and S&P apply plus (+) or minus (-) signs to ratings from ‘AA’ to ‘CCC’ to indicate relative standing within the major rating categories.

The Fitch rating was assigned as AA and has remained unchanged since 1999. The Moody's rating was raised to Aa1 from Aa3 on 4 May 2007. The Standard and Poor's rating was raised to AA from AA- on 21 February 2007.

Outlook

Stable

Negative

Stable

As at the date of the signing of this General Disclosure Statement, the following ratings were assigned to the Commonwealth Bank of Australia's long term debt:

3

Historical Summary of Aggregated Financial Statements

$ millionsFor the year ended 30 June 2009 2008 2007 2006 2005

INCOME STATEMENT (1)

Premium Income 502 448 411 374 325

Reinsurance Income 62 62 62 62 57

Investment Income (117) (27) 280 440 325

Revaluation of Borrowings and Swaps (47) 25 1 74 37

Other Income 35 77 80 13 16

Total Operating Income 435 585 834 963 760

Impairment (Recoveries) / Losses on Advances - - - (3) 1

Total Operating Income After Impairment Losses 435 585 834 966 759

Reinsurance Expenses 70 72 67 66 85

Claims, Surrenders and Maturities 318 299 303 265 160

Net Change in Policy Liabilities - - - - 138

Net Change in Life Insurance Contract Liabilities (218) (168) (20) 52 -

Net Change in Life Investment Contract Liabilities (110) (104) 37 109 -

Commission and Management Expenses 270 314 268 270 232

Finance Costs 11 43 46 44 53

Other Operating Expenses 4 4 3 3 2


Net Profit Before Taxation 90 125 130 157 89

Taxation 5 22 34 62 39

Net Profit After Taxation from Continued Operations 85 103 96 95 50

Gain on Disposal of Discontinued Operations 48 - - - -

Net Profit After Taxation 133 103 96 95 50

Of which Impaired Asset (Recovery) / Expense - - - (3) 3

DIVIDENDS AND REPATRIATIONS PAID

Dividends 20

Branch Profit Repatriated 15 19 22 93 37

Total Dividend and Repatriations Paid 35 19 22 93 37

$ millionsAs at 30 June 2009 2008 2007 2006 2005

BALANCE SHEET (1)

Total Assets 3,249 3,584 3,804 3,761 3,460

Of which Impaired Assets 1 1 1 1 1

Total Liabilities 2,233 2,666 2,965 3,362 3,146

Shareholders' Equity 1,016 918 839 399 314

Life Group

(1) On 1 July 2008, ASB Group Investments Limited, Aegis Limited, Investment Custodial Services Limited and Jacques Martin New Zealand Limited were sold by the Life Group to the Banking Group. The Historical Summary of Aggregated Financial Statements has not been represented to show the continued and discontinued results seperately of the entities sold on 1 July 2008 (the "Discontinued Operations"). Refer to Note 2 Discontinued Operations of the financial statements for further information.

Life Group

The amounts disclosed in this historical summary of aggregated financial statements have been taken from the audited financial statements of the Life Group, which were prepared in accordance with New Zealand equivalents to International Financial Reporting Standards ("NZ IFRS")

5

Income Statement$ millions

Audited AuditedFor the year ended 30 June Note 2009 2008

Continuing Operations: (1)

Premium Income 5 502 448

Reinsurance Income 6 62 62

Investment Income 2, 7 (117) (28)

Revaluation of Borrowings and Swaps 2, 8 (47) 25

Other Income 2, 8 35 31

Total Operating Income 435 538

Total Operating Expenses 345 397

Reinsurance Expenses 6 70 72

Claims, Surrenders and Maturities 9 318 299

Net Change in Life Insurance Contract Liabilities 22 (218) (168)

Net Change in Life Investment Contract Liabilities 22 (110) (104)

Commission and Management Expenses 2, 10 270 251

Finance Costs 11 43

Other Operating Expenses 4 4

Net Profit Before Taxation 2 90 141

Taxation 2, 12 5 27

Net Profit After Taxation Attributed to Parent Company Shareholders from Continuing Operations 2 85 114

Discontinued Operations: (1)

Net Loss after Taxation of Discontinued Operations 2 - (11)

Gain on Disposal of Discontinued Operations 2 48 -

Net Profit After Taxation Attributed to Parent Company Shareholders 2, 4 133 103

Statement of Recognised Income and Expense

Net Profit After Taxation Attributed to Parent Company Shareholders 2, 4 133 103

Total Recognised Income and Expense 133 103


Life Group

(1) On 1 July 2008, ASB Group Investments Limited, Aegis Limited, Investment Custodial Services Limited and Jacques Martin New Zealand Limited were sold bythe Life Group to the Banking Group. When an operation is classified as a Discontinued Operation the current and comparative Income Statements are restated.Please refer to Discontinued Operations (Note 2) to reconcile the comparative Income Statement and Balance Sheet figures to the Notes to the FinancialStatements.

6

Balance Sheet$ millionsAs at 30 June Note 2009 2008

ASSETS (1)

Financial Assets

- Cash and Cash Equivalents 2, 15 629 559

- Securities 14 1,709 2,113

- Derivative Financial Instruments 16 107 74

- Trade and Other Receivables 2, 20 61 66

Reinsured Life Insurance Contracts 23 63 60

Current Taxation Asset 2 60 65

Property, Plant and Equipment 18 34 39

Intangible Assets 19 564 564

Other Assets 21 22 26

3,249 3,566

Assets of Discontinued Operations Held for Sale (1) 2 - 18

Total Assets 3,249 3,584

Total Interest Earning and Discount Bearing Assets 1,624 1,431

Financed by:

LIABILITIES (1)

Life Insurance Contract Liabilities 22 530 746

Financial Liabilities

- Life Investment Contracts 22 984 1,186

- Borrowings 25 353 407

- Derivative Financial Instruments 16 51 25

- Deposited Reserves 23 39 40

- Trade and Other Payables 2, 26 117 145

Deferred Taxation Liability 2, 24 159 108

Provisions 2, 27 - 1

2,233 2,658

Liabilities of Discontinued Operations Held for Sale (1) 2 - 8

Total Liabilities 2,233 2,666

SHAREHOLDER'S EQUITY

Contributed Capital - Ordinary Shareholder 28 - -

Contributed Capital - Convertible Notes 29 503 503

Retained Earnings 30 213 115

Head Office Contribution 31 300 300

Total Shareholder's Equity 1,016 918

Total Liabilities and Shareholder's Equity 3,249 3,584

Total Interest and Discount Bearing Liabilities 392 447

Life Group


(1) During the year ended 30 June 2008 an operation was classified as a Discontinued Operation. The comparative information in the Balance Sheet has been restated. Please refer to Discontinued Operations (Note 2) to reconcile the Income Statement and Balance Sheet figures to the Notes to the Financial Statements.

7

Cash Flow Statement$ millionsFor the year ended 30 June 2009 2008

CASH FLOWS FROM OPERATING ACTIVITIESCash was provided from:

Premium Receipts 582 552 Dividend Receipts 24 31 Interest Receipts 80 99 Mortgage Interest Receipts 1 1 GST Refunds 1 - Sundry Fees and Commission Receipts 31 104 Tax Receipts from Related Parties 56 -

775 787

Cash was applied to:Claims, Surrenders and Maturities Payments 486 497 Net Reinsurance Payments 7 17 Commission Payments 139 122 Payments to Suppliers and Employees 134 194 Interest on Loan Facilities 35 47 Net Tax Payments to Related Parties - 22 Net Tax Payments - 6

801 905

Net Cash Flows from Operating Activities (26) (118)

CASH FLOWS FROM INVESTING ACTIVITIESCash was provided from:

Proceeds from Sale of Subsidiaries 58 - Proceeds from Sale of Securities 4,195 2,636

4,253 2,636

Cash was applied to:Purchase of Investments - 2 Purchase of Securities 3,880 2,413 Purchase and Development of Property, Plant and Equipment 4 17 Forward Foreign Exchange Contract Losses 185 11

4,069 2,443

Net Cash Flows from Investing Activities 184 193

CASH FLOWS FROM FINANCING ACTIVITIESCash was applied to: Dividends and Branch Profit Repatriated 44 28

Repayment of Borrowings 5 - Convertible Notes Repaid 39 27

88 55

Net Cash Flows from Financing Activities (88) (55)

SUMMARY OF MOVEMENTS IN CASH FLOWSNet Increase in Cash and Cash Equivalents 70 20 Add: Cash and Cash Equivalents at Beginning of Year 571 551 Less: Cash of Discontinued Operations (12) -

Cash and Cash Equivalents at End of Year 2, 15 629 571

629 571


Life Group

8

Cash Flow Statement (continued)$ millionsFor the year ended 30 June Note 2009 2008

RECONCILIATION OF NET PROFIT AFTER TAXATIONTO NET CASH FLOWS FROM OPERATING ACTIVITIES

Net Profit After Taxation 133 103

Add: Non-Cash Items and Items Classified as Investing and Financing ActivitiesImpairment of Intangible Assets - 9 Impairment of Leasehold Improvements - (1)Depreciation and Amortisation 8 6 Net Realised and Unrealised - Losses / (Gains) 206 146 Non-Cash Dividends (Paid) / Received (7) (17)Loss on Disposal of Intangible Assets 2 - Tax on Dividends and Repatriation of Profits 11 16 Movement in Income Tax Assets and Liabilities 47 (26)Deferred Acquisition Cost Amortisation 3 3 Net Change in Life Insurance Contract Liabilities recognised in Income Statement - Decrease (218) (168)Net Change in Life Investment Contract Liabilities recognised in Income Statement - Decrease (110) (104)

(58) (136)

Add: Movements in Balance Sheet ItemsTrade Receivables and Sundry Debtors - Increase / (Decrease) 4 (3)Provisions - (Decrease) / Increase (1) 2 Tax Balances 3 - Deferred Fee Balance - (Decrease) / Increase (2) (1)Trade and Expense Creditors - (Decrease) / Increase (11) 22 Life Investment Contract Liabilities - Savings Premium, Claims, Maturities & Surrenders (Net) (92) (90)Life Insurance Contract Liabilities - Deposit Premium, Claims, Maturities & Surrenders (Net) (2) (15)

(101) (85)

Net Cash Flows from Operating Activities (26) (118)

Life Group


9


1 Statement of Accounting Policies

GENERAL ACCOUNTING POLICIES

Basis of Preparation

Critical Accounting Estimates and Judgements

Presentation Currency and Rounding

PARTICULAR ACCOUNTING POLICIES

(a) Basis of ConsolidationSubsidiaries

Acquisition During the PeriodWhere an entity is acquired by the Life Group during the period the results of that entity are included in the Income Statement of the LifeGroup from the date that control or significant influence commenced.

The reporting entity is the Commonwealth Bank of Australia New Zealand Life Insurance Group (the "Life Group") of the CBA NZ Operations, comprising the aggregated results of ASB Group (Life) Limited ("ASBGL"), and its subsidiaries, The Colonial Mutual Life Assurance Society Limited - New Zealand Branch ("CMLA"), Colonial First State Investments (NZ) Limited ("CFSI") and its subsidiaries, Colonial First State Investment Managers (NZ) Limited ("CFSIM") and Colonial Holding Company Limited - New Zealand Branch ("CHC"). The Life Group is 100% owned by Commonwealth Insurance Holdings Limited, with the exception of CHC which is a branch of Colonial Holding Company Limited. The ultimate parent is the Commonwealth Bank of Australia. The Life Group's registered address is Level 28, ASB Bank Centre, 135 Albert Street, Auckland. The basis of aggregation is an addition of the Life Group entities' individual financial statements. All translations and balances between entities within the Life Group have been eliminated. The Life Group's principal areas of business are life insurance and investment management.

The Life Group's financial statements have been prepared in accordance with New Zealand Generally Accepted Accounting Practice ("NZ GAAP"). They comply with New Zealand equivalents to International Financial Reporting Standards ("NZ IFRS") and other applicable Financial Reporting Standards, as appropriate for profit-oriented entities. The financial statements comply with International Financial Reporting Standards.

The following new standards and amendments to standards relevant to the Life Group are not yet effective and have not yet been applied in preparing the financial statements. These standards have been adopted from 1 July 2009 and are not expected to have any impact on the Life Group's reported profit or financial position.

NZ IFRS 8 Operating Segments will affect the financial and descriptive information disclosed about the Life Group's reportable segments.

The preparation of financial statements requires management to make estimates and assumptions that affect the amounts reported in thefinancial statements and accompanying notes. Life Insurance Contract Liabilities (Refer Note 22), Life Investment Contracts (refer to Note 22),Goodwill (refer to Note 19) and Tax (Refer Note 24) all require estimates to be made. Actual results could differ from these estimates, althoughother than for the computation of tax provisions, it is not anticipated that such differences would be material. Uncertainties exist with respect tothe interpretation of complex tax regulations for life insurance activities. Given the complexity of life insurance tax legislation and theassumptions involved, adjustments to income tax expense in future periods may be required.

NZ IFRS 3 Business Combinations (revised) will result in certain measurement changes and additional disclosures in the event of a business combination.

NZ IAS 1 Presentation of Financial Statements (revised) will result in the presentation of both a Statement of Comprehensive Income and Statement of Changes in Equity.

The critical judgements used by management in applying the accounting policies that have most significant effect on the amounts recognised in the financial statements, apart from those involving estimation, are the designation of financial assets and financial liabilities as at fair value through profit or loss. Critical judgements are also applied to the classification of the Life Group's life insurance business between Life Insurance Contracts and Life Investment Contracts.

The Directors do not have the power to amend the financial statements once issued.

The financial statements have been drawn up in accordance with the Companies Act 1993 and the Financial Reporting Act 1993 and to the extent applicable to the Life Group, the Registered Bank Disclosure Statement (Full and Half Year Overseas Incorporated Registered Banks) Order 2008. They were approved for issue by the Directors on 24 September 2009.

The measurement base adopted is historical cost, modified by the fair value measurement of Financial Instruments held at Fair Value throughProfit or Loss, and all Derivative contracts.

The functional and presentation currency of the Life Group is New Zealand dollars. The amounts contained in this disclosure statement and thefinancial statements are presented in millions of New Zealand dollars, unless otherwise stated.

NZ IFRS 7 Financial Instruments: Disclosures (revised) will affect the financial and descriptive information disclosed about the Life Group's financial instruments.

NZ IAS 27 Consolidated and Separate Financial Statements (revised) changes aspects of accounting for non-controlling interests and clarifies the accounting for changes in a parent's ownership interest in a subsidiary.

A Glossary of Terms included with the Statement of Accounting Policies is set out on page 17 and 18.

There have been no material changes to accounting policies in the year ended 30 June 2009. All policies have been applied on a basisconsistent with that used in the year ended 30 June 2008.

Subsidiaries are those entities controlled by the Life Group. Control exists when the Life Group has the power, directly or indirectly, togovern the financial and operating policies of entities so as to obtain benefit from their activities. The financial statements of subsidiariesare included in the Life Group’s financial statements using the purchase method of consolidation. All intra-group balances andtransactions have been eliminated in preparing the consolidated financial statements.

10



Goodwill on Acquisition

(b) Foreign Currency Translation

(c) Revenue and Other Income Recognition

Premium Income(i) Life Insurance Contracts

(ii) Life Investment Contracts

Investment Income

Other IncomeOther Income is recognised on an accrual basis. Deferred fees are amortised on an effective yield basis.

(d) Expense Recognition

Claims, Surrenders and Maturities

Other Expenses

Commission and Management Expenses

Acquisition Costs

Goodwill arising on the acquisition of an entity represents the excess of purchase consideration over the fair value of identifiable netassets acquired, and is capitalised and recognised in the Balance Sheet. Goodwill has an indefinite life.

Revenue is recognised to the extent that it is probable that economic benefits will flow to the Life Group, and that the revenue and other income and stage of completion of the transaction can be reliably measured. The principal sources of revenue is Premium Income and the principal source of other income is Investment Income.

All foreign currency monetary assets and liabilities are translated to New Zealand currency at the exchange rate ruling as at balance date. Foreign currency forward and swap positions are valued at fair value as at balance date. Unrealised gains and losses arising from the revaluations are recognised immediately in the Income Statement.

Non-monetary assets and liabilities denominated in foreign currencies, measured at fair value, are translated to New Zealand currency at the exchange rate ruling at the dates that the values were determined. Foreign currency exchange differences relating to investments at Fair Value through Profit or Loss and Derivative Financial Instruments are included in Investment Income or Other Income.

Foreign currency transactions are translated to New Zealand currency at the exchange rate ruling at the date of the transaction.

The assets and liabilities of the personal superannuation business, for which various Life Group companies act as a trustee, are not included in the Life Group financial statements.

Life Group Companies Acting as Trustee

The carrying value of Goodwill is tested annually for impairment, or more frequently if events or changes in circumstances indicate that it might be impaired. If any such indication exists, the asset's recoverable amount is estimated, and an impairment loss is recognised under Operating Expenses in the Income Statement for the difference between the carrying amount and the recoverable amount. Impairment losses on goodwill are not reversed. For the purposes of impairment testing, Goodwill is allocated to cash generating units or groups of units. A cash generating unit is the smallest identifiable group of assets that generate independent cash flows. Goodwill is allocated by the Life Group to cash generating units or groups of units based on how Goodwill is monitored by management. Gains and losses on the disposal of an entity include the carrying value of the goodwill relating to the entity sold.

Acquisition costs are the fixed and variable costs of acquiring new business including commissions and similar distribution costs, and costs of accepting, issuing and initially recording policies. They do not include general growth and development costs incurred by the Life Group as these do not directly relate to specific life insurance policies.

Other expenses incorporate all other expenditure involved in running the Life Group including costs of new business, employee benefits, depreciation, interest and other management costs. Employee benefits include salaries and wages, annual and long service leave, annual bonuses, Kiwisaver contributions, and premiums on employee life, disability income and medical schemes. Expenses in this category are recognised in the Income Statement as follows:

Commission and management expenses are categorised into acquisition, investment management or maintenance costs on the basis of a detailed functional analysis of activities carried out by the Life Group. Expenses are further categorised into life insurance and life investment expenses based on new business volumes (acquisition costs) and in force volumes (maintenance and investment management costs).

Interest income is recognised in the Income Statement as it accrues. Dividend income and unit trust distributions are recognised in the Income Statement when the Life Group's right to receive this is established. Realised and unrealised gains and losses from fair value remeasurement of Financial Instruments at Fair Value through Profit or Loss are included in Investment Income or Other Income.

All expenses are recognised in the Income Statement on an accrual basis.

Life insurance contract claims are recognised as an expense when a liability has been established. Claims under life investment contracts represent withdrawals of investment deposits and are recognised as a reduction in Life Investment Contract Liabilities.

Initial entry fee income on investment contracts is recognised as revenue at the outset of the contract only if a specific initial service (for which the fee relates) is provided by the Life Group at that time. Otherwise initial entry fee income is deferred as a component of the Life Investment Contract Liability and amortised as related services are provided under the contract.

Premiums received for providing services and bearing risks are recognised as revenue on an accrual basis.

Premiums received have the fee portion of the premium recognised as revenue on an accrual basis and the deposit portion recognised as an increase in Life Investment Contract Liabilities.

11



Acquisition Costs - Life Insurance Contracts

Acquisition Costs - Life Investment Contracts

Maintenance and Investment Management Expenses

(e) Dividend Recognition

(f) Financial InstrumentsBASIS OF RECOGNITION AND MEASUREMENT

FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSSAssets in this category are measured at fair value at inception and on an ongoing basis and include:

Securities

Assets included within Securities are as follows:

(i) Shares in Listed Companies, Unit Trusts and Managed Funds

(ii) Fixed Interest SecuritiesFixed Interest Securities are recognised at fair value based on a quoted bid market price.

(iii) Mortgages and Loans on Policies

Derivative Assets

Other expenses for the Life Group are recognised in the Income Statement on an accrual basis.Other

Dividends on Convertible Notes are recognised as a liability and movement in equity on an accrual basis. Refer to Note 30 for details of dividend calculation and payment frequency.

Derivative Assets that do not meet the criteria for hedge accounting are recorded at Fair Value through Profit or Loss. Refer to (g) for more details on derivatives.

Investments held by life insurance companies are stated at fair value. The financial assets in this category have been designated at inception as at Fair Value through Profit or Loss because they back life insurance liabilities or investment contract liabilities except for the annuity investment (refer below). Gains and losses arising from the fair value remeasurement of Securities are included as part of Investment Income in the Income Statement.

Shares and units are recognised at fair value based on the bid market price quoted by the stock exchange or fund manager.

Mortgages and loans on policies are recognised at fair value based on a market accepted valuation technique, using methods and assumptions that are based on market conditions and risks existing at the balance date.

The annuity investment has been designated at inception as at Fair Value through Profit or Loss, as it covers the interest spread in an interest rate swap derivative. Gains and losses arising from the fair value remeasurement are included as part of Investment Income in the Income Statement. The annuity investment is recognised at fair value based on a market accepted valuation technique, using methods, rates and assumptions that are based on market conditions and risks existing at the balance date.

The Life Group classifies financial instruments into one of the following categories at initial recognition: Financial Assets at Fair Value through Profit or Loss, Available for Sale Financial Assets, Loans and Receivables, Held to Maturity, Financial Liabilities at Fair Value through Profit or Loss and Other Financial Liabilities. Regular purchases and sales of financial assets are recognised and derecognised, as applicable, using trade date accounting.

Some of these categories require measurement at fair value. Where available, quoted market prices are used as a measure of fair value. Where quoted market prices do not exist, fair values are estimated using present value or other market accepted valuation techniques, using methods and assumptions that are based on market conditions and risks existing as at the balance date.

Financial assets that are stated at cost or amortised cost are reviewed individually at each balance date to determine whether there is objective evidence of impairment. If any such evidence exists, the asset's recoverable amount is calculated using the present value of future estimated cash flows discounted at the original effective interest rate. An impairment loss is recognised in the Income Statement for the difference between the carrying amount and the recoverable amount. An impairment loss is reversed if the subsequent increase in the recoverable amount can be related objectively to an event occurring after the impairment loss was recognised. The impairment loss is reversed only to the extent that the financial asset's carrying amount does not exceed the carrying amount that would have been determined if no impairment loss had been recognised.

Where overall product profitability of new business written during the period is expected to support the recovery of acquisition costs incurred in that year, these costs are effectively deferred as an element of Life Insurance Contract Liabilities and amortised over the life of the policies written. Unamortised acquisition costs are a component of the Life Insurance Contract Liabilities. Amortisation of acquisition costs are recognised in the Income Statement as a component of 'Net Change in Insurance Contract Liabilities' at the same time as policy margins are released.

Maintenance costs are the fixed and variable costs of administering policies subsequent to sale. These include general growth and development costs. Maintenance costs include all operating costs other than acquisition and investment management costs.

Investment management costs are the fixed and variable costs of managing investment funds. Maintenance and investment management costs are recognised in the Income Statement on an accrual basis.

Commission that varies with and is directly related to securing new contracts is capitalised as a deferred acquisition cost asset. All other acquisition costs are recognised as expenses in the Income Statement when incurred. The deferred acquisition cost asset is subsequently amortised over the life of the contracts and recognised in the Income Statement. Unamortised acquisition costs are recorded in Other Assets.

12



Reinsured Life Investment Contracts

AVAILABLE FOR SALE FINANCIAL ASSETS

LOANS AND RECEIVABLES

Cash and Cash Equivalents

Trade and Other Receivables

HELD TO MATURITY

DERECOGNITION OF FINANCIAL ASSETS

FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS

Investment ContractsRefer to (n) for details of Life Investment Contract Liabilities.

Derivative Liabilities

Deposited Reserves

OTHER FINANCIAL LIABILITIES

Borrowings

Trade and Other Payables

DERECOGNITION OF FINANCIAL LIABILITIES

(g) Derivative Financial Instruments

Derivative Financial Instruments at Fair Value through Profit or Loss

Derivative instruments are contracts whose value is derived from one or more underlying financial instruments or indices defined in the contract. Forward exchange contracts are used to reduce the Life Group's exposure to foreign exchange movements affecting the market value of the Life Group's investments denominated in foreign currencies. Derivatives, including cross currency and interest rate swaps, are used to mitigate the foreign exchange and interest rate risk on borrowings.

The Life Group recognises derivatives in the Balance Sheet at their fair value. Derivative Assets are the fair value of derivatives which have a positive fair value. Derivative Liabilities are the fair value of derivatives which have a negative fair value. Derivatives are recorded at fair value based on market accepted valuation techniques.

All derivatives that do not meet the criteria for hedge accounting under NZ IAS 39 Financial Instruments: Recognition and Measurement are classified as Held for Trading. This includes derivatives transacted to mitigate foreign currency and interest rate risk. Changes in fair value are reflected in the Income Statement as Other Income immediately when they occur.

Trade and Other Payables include dividends payable, interest payable, trade creditors and accruals, amounts due to reinsurers, deferredfees, and amounts due to related parties. These items are recognised when due and measured on initial recognition at the fair value ofconsideration received less transaction costs. After initial recognition, they are measured at amortised cost.

This category includes all financial liabilities other than those designated by the Life Group as Fair Value through Profit or Loss. Liabilities in this category are measured at amortised cost and include:

Borrowings are recorded initially at fair value plus transaction costs that are directly attributable to the borrowings. After initial recognition the borrowings are measured at amortised cost on an effective yield basis.

Derivative Liabilities that do not meet the criteria for hedge accounting are recorded at Fair Value through Profit or Loss. Refer to (g) for more details on derivatives.

Refer to (n) for details on Reinsured Life Investment Contracts.

Available for Sale Financial Assets are measured at fair value, with changes in fair value recognised directly in Shareholders' Equity. The Life Group has not classified any financial assets in this category.

A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expired.

Refer to (n) for details on reinsurance Deposited Reserves.

Assets in this category are recognised initially at fair value plus transaction costs and subsequently measured at amortised cost less any allowance for uncollectible amounts and include:

Financial Assets are derecognised either when sold, or when the rights to receive cash flows from the financial assets have expired or have been transferred, or the Life Group has transferred substantially all the risks and rewards of ownership. In transactions where substantially all the risk and rewards are neither retained nor transferred, the Life Group derecognises assets when control is no longer retained, or when control is retained the assets are recognised to the extent of the Life Group's continuing involvement.

Assets in this category are measured at amortised cost. The Life Group has not classified any financial assets as Held to Maturity.

Cash and Cash Equivalents include cash on hand, bank current accounts and cash on deposit that is readily convertible to known amounts of cash which are subject to an insignificant risk of changes in value. They are brought to account at the face value and interest is taken to the Income Statement when earned.

Trade and Other Receivables include securities sold but not delivered, income receivable, amounts due from reinsurers, amounts due from related parties, amounts due from agents and other trade debtors.

Liabilities in this category are measured at fair value. Gains and losses arising from the fair value remeasurement of Financial Liabilities at Fair Value through Profit or Loss are included in the Income Statement. Financial Liabilities included within Financial Liabilities at Fair Value through the Profit or Loss include:

13



Derivative Financial Instruments qualifying for Hedge Accounting

(h) Offsetting Financial Instruments

(i) Investments in Subsidiaries

(j) Property, Plant and Equipment

Leasehold Improvements and Services 10 - 18 yearsOffice Equipment, Furniture and Fittings 3 - 10 years

(k) Intangible Assets

GoodwillRefer to (a) for details on Goodwill.

Internally Developed Software

Other Intangible Assets

ImpairmentRefer to (a) for details on Goodwill impairment.

(l) Taxation

Costs for advertising signage rights and the right to service policies have also been capitalised and treated as Intangible Assets. These assets are amortised using the straight-line method over their useful lives, estimated as 10 years and 30 months respectively.

Current tax is the expected tax payable on the taxable income for the period, using tax rates enacted or substantially enacted at balance date after taking advantage of all allowable deductions under current taxation legislation and any adjustment to tax liabilities in respect of previous financial years.

Income Tax on the Net Profit for the year comprises current and deferred tax. Income tax is recognised in the Income Statement except to the extent that it relates to items recognised directly within Shareholders' Equity, in which case it is recognised directly in Shareholders' Equity.

Tax losses are transferred among group companies through intercompany accounts at the current tax rate.

Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at balance date.

In accordance with NZ IAS 12, Income Taxes, a Deferred Taxation Benefit is recognised only to the extent that it is probable (i.e. more likely than not) that a future taxable profit will be available against which the asset can be utilised. Deferred Taxation Benefits are reduced to the extent that it is no longer probable that the related tax asset will be realised. Any reduction is recognised in the Income Statement.

Intangible Assets are reviewed for impairment annually to identify events or changes in circumstances that indicate that the carrying amount may not be recoverable. If an asset's carrying amount is greater than its estimated recoverable amount, the carrying amount is written down to its recoverable amount. The recoverable amount is the higher of the asset's fair value less costs to sell and the asset's value in use. Any impairment loss is recognised in the Income Statement. To assess impairment, assets are allocated to cash generating units

The Life Group offsets financial assets and financial liabilities and reports the net balance in the Balance Sheet where there is a legally enforceable right to set-off and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.

The Life Group uses derivatives as part of its asset and liability management activities to manage exposures to interest rate and foreign currency risks. The Life Group applies fair value hedge accounting when transactions meet the hedge accounting criteria in NZ IAS 39. The Life Group documents at the inception of the transaction the relationship between the hedging instruments and hedged items. The Life Group assesses (both at inception and on an ongoing basis), whether the derivatives are expected to be, and have been, highly effective in offsetting changes in fair values of hedged items. The Life Group has not used hedge accounting to account for any transaction in the financial statements.

The Life Group generally expenses Computer Software costs in the period incurred. However, some costs associated with developing identifiable and unique software products controlled by the Life Group, including employee costs and an appropriate portion of relevant overheads are capitalised and treated as Intangible Assets. These assets are amortised using the straight-line method over their useful lives (not exceeding three years).

Assets are reviewed for impairment indicators annually to identify events or changes in circumstances that indicate that the carrying amount may not be recoverable. If an asset's carrying amount is greater than its estimated recoverable amount, the carrying amount is written down to its recoverable amount. The recoverable amount is the higher of the asset's fair value less costs to sell and the asset's value in use. Any impairment loss is recognised in the Income Statement. For the purposes of assessing impairment, assets are grouped at the lowest level for which there are separately identifiable cash flows (cash generating units).

Investments in Subsidiaries are recognised in the Balance Sheet at the lower of cost or recoverable amount. Investment in Subsidiaries are assessed for impairment annually or more regularly where an indication of impairment exists. If any such indication exists, the asset's recoverable amount is estimated, and an impairment loss is recognised in the Income Statement for the difference between the carrying amount and the recoverable amount.

The cost of Property, Plant and Equipment less the estimated residual value is depreciated over their useful lives on a straight line basis. Depreciation of work in progress will not begin until the asset is available for use i.e. when it is in the location and condition necessary for it to be operating in the manner intended by management. The estimated useful lives of the major assets are:

Property, Plant and Equipment are stated at cost less Accumulated Depreciation and Impairment Losses.

14



(m) Provisions

(n) Life Insurance Business

Life Insurance Contract Liabilities and Margin on Services Profit

Profit is analysed into the following categories:

(i) Planned margins of revenues over expenses.

(ii) The difference between actual and assumed experience.

(iii) Changes to underlying assumptions.

(iv) Investment earnings on assets in excess of policy liabilities.

Life Investment Contract LiabilitiesInvestment contract liabilities are measured in accordance with NZ IAS 39.

Identification of Assets Backing Life Investment Contract Liabilities

Reinsurance

All contracts issued by the Life Group which are classified as investment contracts are unit-linked except for term deposit bonds. The fair value of a unit linked contract is determined using the current unit values that reflect the fair value of the financial assets backing the contract, multiplied by the number of units attributed to the contract holder.

A provision is recognised in the Balance Sheet when: the Life Group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and a reliable estimate can be made of the amount of the obligation.

Life Insurance Contract Liabilities are calculated in a way that allows for the systematic release of planned profit margins as services are provided to policy owners and the revenues relating to those services are received. Services used to determine profit recognition include the cost of expected insurance claims and annuity payments. Life Insurance Contract Liabilities are generally determined as the present value of all future expected payments, expenses, taxes and profit margins reduced by the present value of all future expected

i

At the time of writing a policy and as at each balance date, best estimate assumptions are used to determine all expected future payments (including tax) and premiums. Where actual experience replicates best estimate assumptions, the expected profit margins will be released to profit over the life of the policy.

Experience profits / (losses) are realised where actual experience differs from best estimate assumptions. Instances giving rise to experience profits / (losses) include variations in claims, expenses, mortality, discontinuance and investment returns (to the extent the Shareholder assumes investment risk).

Life insurance contracts are those contracts that transfer significant insurance risk. Life investment contracts are those contracts with no significant insurance risk, but which give rise to a financial asset and/or liability under NZ IAS 39.

Contracts that contain a discretionary participation feature are also classified as insurance contracts.

Life Insurance Contract Liabilities are calculated in accordance with the Margin on Services (MoS) methodology as set out in New Zealand Society of Actuaries Professional Standard 3: Determination of Life Insurance Liabilities and the requirements of NZ IFRS 4.

Life Insurance and Life Investment Contracts – ClassificationThe Life Group's life insurance business is split between Life Insurance Contracts and Life Investment Contracts. Life Insurance Contracts are accounted for in accordance with the requirements of NZ IFRS 4 Insurance Contracts . Life Investment Contracts are accounted for in accordance with NZ IAS 18 Revenue and NZ IAS 39.

Life Insurance Tax

Life insurers are subject to a special tax regime. Two tax bases are maintained; the life office base which is subject to tax on investment income less expenses plus underwriting income, and the policyholder base which seeks to tax benefits as they accrue to policyholders under the policies. The life insurer pays tax on the higher of the two bases at the company tax rate of 30% (33% up to 30 June 2008). The life insurer is able to use accumulated imputation credits generated in the life office base to meet any tax liability arising in the policyholder base. As the life insurer is taxed as proxy for the policyholder, returns to policyholders are tax exempt.

Contracts entered into by the Life Group with reinsurers which meet the definition of an insurance contract have been classified as an asset Reinsured Life Insurance Contracts in the Balance Sheet. Reinsurance contracts that do not meet this definition have been classified as a financial asset Reinsured Life Investment Contracts.

Assumptions used for measuring life insurance contract liabilities are reviewed each period. Where the review leads to a change in assumptions, the change is deemed to have occurred from the end of the year.

All contracts issued by the Life Group which are classified as Life Insurance Contracts are non linked. The assets backing unit linked contracts and those backing term deposit bonds are in separate investment funds from those backing non linked contracts.

The financial effect of a change in discount rates resulting from changes in market conditions, is recognised in the year that the rates are changed. The financial effect of all other changes to assumptions is recognised in the Income Statement over the future years during which services are provided to policyholders.

If, based on best estimate assumptions, written business of a group of related products is expected to be unprofitable, the total expected loss for that related product group is recognised in the Income Statement immediately. When loss making business becomes profitable previously recognised losses are reversed.

Profits are generated from investment assets in excess of those required to meet policy liabilities. Investment earnings are directly influenced by market conditions and as such this component of MoS profit will vary from year to year.

The fair value of a term deposit bond is determined as the present value of future expected cashflows payable under the bond discounted at the risk free rate of return appropriate to the outstanding term of the bond portfolio.

15



(o) Retirement Benefits Obligations

Defined Benefit Plans

Defined Contribution Plans

(p) Contingent Liabilities

(q) Transactions with CBA NZ Operations

(r) Cash Flow Statement

(s) Segment Reporting

(t) Fair Value Estimates


The liability or asset recognised in the Balance Sheet in respect of defined benefit superannuation plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in current and prior periods; that benefit is discounted to determine the present value, and the fair value of the plans assets are deducted. The discount rate is the yield at balance sheet date on government securities which have terms to maturity approximately the same as the related liability. The defined benefit calculation is performed using the projected unit credit method.

The Life Group currently sponsors three superannuation plans for its employees and ex-employees. The assets and liabilities of these plans are held independently of the Life Group’s assets in separate trustee administered funds. The Life Group has both defined benefit and defined contribution plans.

Defined contribution plans are post-employment benefit plans under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further contributions if the fund does not hold sufficient assets to pay all employee benefits relating to employee service in the current and prior periods.

Where the calculation results in a benefit to the Life Group, the recognised asset is limited to the present value of any future employer contributions to the plan that can be funded from the plan surplus.

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited directly toRetained Earnings. Current service costs are recognised immediately in Income.

Contributions to defined contribution plans are recognised as an expense in the Income Statement as incurred.

These assets are short term in nature and the carrying value is approximately equivalent to their fair value.

The Life Group predominantly operates within New Zealand and has very limited exposure to risks associated with operating in different economic environments or political conditions. On this basis no geographical segment information is provided, except for Concentrations of Credit Exposures by Geographic Region (refer to Note 46).

The Life Group discloses a Contingent Liability when it has a possible obligation arising from past events, that will be confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the Life Group's control. A Contingent Liability is disclosed when a present obligation is not recognised because it is not probable that an outflow of resources will be required to settle an obligation, or the amount of the obligation cannot be measured with sufficient reliability.

The Life Group's primary reporting format is business segments. Segments reported are in line with the organisational structure of the Life Group and take into account the nature of the products and services provided. Segment results include items directly attributable to a segment as well as those items that can be reasonably allocated using Activity Based Costing.

Due to the diverse nature of the Commonwealth Bank of Australia's operations in New Zealand, the New Zealand operations have been broken into two separate Groups, and separate disclosures compiled for each group. Transactions between the Life Group (reporting entity) and the Banking Group have not been eliminated. This will better reflect the true nature of activities within New Zealand.

This has been prepared using the direct approach, modified by the netting of cash flows associated with Reinsurance. This method reflects the right of set off in reinsurance treaties. Cash and Cash Equivalents are considered to be cash on hand, bank current accounts, cash on deposit and bank overdrafts. Cash flows are shown exclusive of Goods and Services Tax ("GST").

Financial instruments classified as at Fair Value through Profit or Loss are presented in the Life Group's Balance Sheet at their fair value. For Other Financial Assets and Financial Liabilities, fair value is estimated as follows:

As the reinsurance agreements provide for indemnification of the Life Group by the reinsurers against loss or liability, reinsurance income and expenses are recognised separately in the Income Statement when they become due and payable in accordance with the reinsurance agreements.

Reinsurance recoveries for claims are recognised as Reinsurance Income. Reinsurance premiums are recognised as Reinsurance Expenses.

Reinsured Life Insurance Contracts are the present value of future reinsurance claims receivable and premiums payable by the Life Group.

Defined benefit plans are formal or informal arrangements under which an entity provides post-employment benefits.

Deposited Reserves are funds the Life Group holds for reinsurers. The Deposited Reserves are backed by the Reinsured Life Insurance Contract Liabilities and the Reinsured Life Investment Contracts. They are recognised as financial liabilities. Under NZ IAS 32 Financial Instruments: Presentation , Deposited Reserves are offset against Reinsured Life Investment Contracts for presentation in the Balance Sheet to the extent that the Life Group has a legal right and intent to realise the Deposited Reserves to simultaneously settle any reinsurance claims on those contracts.

Reinsured Life Investment Contracts are measured at fair value. The fair value is determined using the current unit values that reflect the fair value of the financial assets backing the contract, multiplied by the number of units attributed to the contract holder.

16



Trade and Other Receivables

Borrowings

Trade and Other PayablesThese liabilities are short term in nature and the carrying value is approximately equivalent to their fair value.

(u) Operating Leases

(v) COMPARATIVE DATA

GLOSSARY OF TERMS

Discretionary Participation Feature

Effective Yield Method

Fair Value

Fair Value Hedge

Financial Instruments at Fair Value through Profit or Loss

The amount by which changes in the cash flow of the hedging derivative differ from changes (or expected changes) in the cash flow of the hedged item, or the amount by which the changes in the fair value of the hedging derivative differ from changes in the fair value of the hedged item. Such gains and losses are recorded in the current period Income Statement.

Hedge EffectivenessThe degree to which changes in the fair value or cash flows of the hedged items that are attributable to the hedged risk are offset by changes in the fair value or cash flows of the hedging instrument.

Hedge Ineffectiveness

A hedge of the exposure to changes in fair value of a recognised asset or liability or an unrecognised firm commitment, or an identified portion of such an asset, liability or firm commitment, that is attributable to a particular risk and could affect profit or loss.

All financial assets and financial liabilities held for trading and any financial asset or financial liability that on initial recognition is designated by the Life Group as Fair Value through Profit or Loss. Assets and Liabilities in this category are measured at fair value. Gains or losses arising from changes in fair value are recognised in Investment Income.

A method of calculating the amortised cost of a financial asset or financial liability (or group of financial assets or financial liabilities) and of allocating the Interest Income or Interest Expense over the relevant period. The effective yield is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or, when appropriate, a shorter period to the net carrying amount of the financial asset or financial liability. When calculating the effective yield, the Life Group estimates cash flows considering all contractual terms of the financial instrument but does not consider future credit losses. The calculation includes all fees paid or received between parties to the contract that are an integral part of the effective yield rate, transaction costs and all other premiums or discounts. The interest income or expense is allocated through the life of the instrument and is measured for inclusion in the Income Statement by applying the effective yield to its amortised cost.

The amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's length transaction.

Non-derivative financial assets intended to be held for an indefinite period of time, and which may be sold in response to needs for liquidity or changes in interest rates or exchange rates. They are recognised on acquisition at fair value plus transaction costs and thereafter at fair value. Changes in the value of Available for Sale Financial Assets are reported in an Available for Sale Reserve in Equity, until the assets are sold or otherwise disposed of, or until they are impaired. On disposal the accumulated change in fair value is transferred to the Income Statement and reported under Other Income. Interest, premiums and discounts are amortised through the Income Statement using the effective yield method.

A contractual right to receive, as a supplement to guaranteed benefits, significant additional benefits, where the amount and timing of those additional benefits is at the discretion of the Life Group.

For floating rate borrowings, the carrying amount in the Balance Sheet is considered a reasonable estimate of their fair value. For Fixed Rate Borrowings, fair value is estimated using a discounted cash flow model.

The amount at which the financial asset or financial liability is measured at initial recognition minus principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between that initial amount and the maturity amount, and minus any reduction (directly or through the use of an allowance account) for impairment or uncollectibility.

Available for Sale Financial Assets

Amortised Cost of Financial Asset or Financial Liability

Certain comparative figures have been reclassified to conform with the current year's presentation but the impact of any reclassification is immaterial.

Operating lease payments are recognised in the Income Statement on a straight-line basis over the term of the lease, unless another systematic basis is more representative of the time pattern of the benefit received. All other expenses are recognised in the Income Statement on an accrual basis.

The carrying amount in the Balance Sheet is considered a reasonable estimate of their fair value after making allowances for the fair value of non-accrual and potential problem loans and receivables.

17



Monetary items are units of currency held and assets and liabilities to be received or paid in a fixed or determinable number of units ofcurrency.

Monetary Assets and Liabilities

Impairment LossThe amount by which the carrying amount of an asset exceeds its recoverable amount.

Loans and ReceivablesNon-derivative financial assets with fixed or determinable payments that are not quoted on an active market. They are measured atamortised cost using the effective yield method.

Hedged ItemAn asset, liability, firm commitment or highly probable forecast transaction that exposes the Life Group to risk of changes in fair value or cashflows, and that is designated as being hedged.

Hedging InstrumentA designated derivative, the changes in fair value or cash flows of which are expected to offset changes in the fair value or cash flows of adesignated hedged item.

Held to Maturity InvestmentsNon-derivative financial assets with fixed or determinable payments and a fixed maturity that the Life Group has a positive intention andability to hold to maturity. They are measured at amortised cost using the effective yield method.

18


2 Discontinued Operations

$ millions NoteContinuing Operations

Discontinued Operations Total

For the Year Ended 30 June 2008

Premium Income 5 448 - 448Reinsurance Income 6 62 - 62Investment Income 7 (28) 1 (27)Revaluation of Borrowings and Swaps 8 25 - 25Other Income 8 31 46 77

Total Operating Income 538 47 585

Total Operating Expenses 397 63 460

Reinsurance Expenses 6 72 - 72Claims, Surrenders and Maturities 9 299 - 299Net Change in Life Insurance Contract Liabilities 22 (168) - (168)Net Change in Life Investment Contract Liabilities 22 (104) - (104)Commission and Management Expenses 10 251 63 314Finance Costs 43 - 43Other Operating Expenses 4 - 4

Net Profit / (Loss) before Taxation 37 141 (16) 125

Taxation 12 27 (5) 22

Net Profit / (Loss) after Taxation 4 114 (11) 103

A Discontinued Operation is a component of the Life Group's business that represents a separate major line of business that has been disposed ofor is classified as held for sale, or is a subsidiary that has been disposed of or classified as held for sale.

In accordance with NZ IFRS 5 Non-current Assets Held for Sale and Discontinued Activities, when an operation is classified as a DiscontinuedOperation the comparative Income Statement is restated as if the operation had been discontinued from the start of the comparative period.

On 1 July 2008 the Life Group sold 100% of the ordinary capital of Aegis Limited, ASB Group Investments Limited, Investment Custodial ServicesLimited and Jacques Martin New Zealand Limited to a fellow subsidiary of CBA, ASB Bank Limited for consideration of $58m cash and cashequivalents. This resulted in the derecognition of Net Tangible Assets of $10m in the Life Group. A Gain on Sale of $48m was recorded in the LifeGroup due to the sale of the above entities during the year ended 30 June 2009. The sale of the above entities resulted in the Life Group having nooperations in the Asset Management segment for the year ended 30 June 2009 (refer note 37).

Life Group

The Notes to the Financial Statements include the results of the entities sold on 1 July 2008 (the "Discontinued Operations"). Excludingintercompany amounts, the Net Profit after Taxation for the Discontinued Operations can be analysed as follows:

19


2 Discontinued Operations (continued)

$ millions NoteContinuing Operations

Discontinued Operations Total

As at 30 June 2008

ASSETSFinancial Assets - Cash and Cash Equivalents 15 559 12 571 - Securities 14 2,113 - 2,113 - Derivative Financial Instruments 16 74 - 74 - Trade and Other Receivables 20 66 4 70 Reinsured Life Insurance Contracts 23 60 - 60 Current Income Taxation Asset 65 1 66 Property, Plant and Equipment 18 39 - 39 Intangible Assets 19 564 1 565 Other Assets 21 26 - 26

Total Assets 3,566 18 3,584

LIABILITIESLife Insurance Contract Liabilities 22 746 - 746

Financial Liabilities - Life Investment Contracts 22 1,186 - 1,186 - Borrowings 25 407 - 407 - Derivative Financial Instruments 16 25 - 25 - Deposited Reserves 23 40 - 40 - Trade and Other Payables 26 145 8 153 Deferred Taxation Liability 24 108 (5) 103 Provisions 27 1 5 6

Total Liabilities 2,658 8 2,666

Cash Flows for the Discontinued Operations can be analysed as follows:

$ millions Total

For the Year Ended 30 June 2008

Net Cash Flows from Operating Activities (4)Net Cash Flows from Investing Activities (8)

(12)

Excluding intercompany amounts, the assets and liabilities of the Discontinued Operations can be analysed as follows:

Life Group

Net Decrease in Cash and Cash Equivalents at End of Year

20


3 Actuarial Policies and Methods

(a) Discount RatesBusiness where Benefits are Contractually Linked to the Performance of Assets Held

Other business

(b) Profit Carriers

Policy type CarrierRisk Insurance claimsSavings Business Funds under management / Investment Management ChargesTraditional Participating Business Bonuses

(c) Investment and Maintenance Expenses

(d) Taxation

(e) Rates of Growth of Unit Prices

(f) Mortality and Morbidity

(g) Rates of Discontinuance

The proportions of the NZ97 adopted range from 53% to 120% (30 June 2008 55% to 120%).

Policy liabilities and solvency reserves as at 30 June 2009 for Sovereign Assurance Company Limited ("SACL") and The Colonial Mutual Life Assurance Society Ltd - New Zealand Branch ("CMLA") were prepared by Ian Perera FNZSA.

Key assumptions used in determining Life Insurance Contract liabilities are as follows:

The discount rates used to determine Life Insurance Contract Liabilities reflect the expected future gross returns on the Life Group’s current asset mix. Fixed interest investments were assumed to earn 5.9% per annum ("pa") (30 June 2008 6.3% pa) and equity investments 9.9% pa (30 June 2008 10.3% pa). The discount rates used for individual classes of business varied between 5.9% and 6.8% (30 June 2008 6.3% and 10.3%).

The discount rate used to determine Life Insurance Contract Liabilities is a risk free discount rate. For annuities and traditional non-participating business a rate of 5.9% pa was used at 30 June 2009 (30 June 2008 6.3% pa). For other risk business a rate of 4.8% pa was used at 30 June 2009 (30 June 2008 6.3% pa). These rates were based on the 10 year government bond rate and the 5 year government bond rate respectively.

The Life Insurance Contract liabilities have been determined in accordance with Professional Standard 3 of the New Zealand Society of Actuaries, together with the requirements of NZ IFRS 4. The actuary is satisfied as to the accuracy of the data from which the amount of Life Insurance Contract liabilities has been determined.

Assumptions are reviewed based on annual experience studies. The most significant change since 30 June 2008 was a reduction in assumed mortality for the current range of risk business.

Assumptions for the incidence of withdrawal, partial termination and transfer of policies to paid-up are primarily based on investigations of the Life Group's own experience.

Discontinuance rates were revised at 30 June 2009 for the current range of risk business. Broadly, they were increased for death cover, but reduced for disability cover, from those assumed at 30 June 2008.

Policies are divided into related product groups with profit carriers and profit margins as follows:

Future maintenance and investment expenses have been assumed at current levels in line with contractual fees set out in agreement with Sovereign Services Limited and ASB Group Investments Limited. Future inflation has been assumed to be 2.0% pa (30 June 2008 2.5% pa) for determining future expenses and inflation linked increases in benefits and premiums.

The rates of taxation enacted or substantially enacted at the date of the valuation are assumed to continue into the future. The corporate tax rate used was 30% (30 June 2008 33%). Allowance has been made for the "fair dividend rate" rules that apply to global equities, where tax is paid on 5% of the market value of investments, regardless of the actual rate of investment income.

Future morbidity experience has been based on a combination of reinsurers tables, industry experience and internal investigations. For significant classes of business, internal experience is compared with reinsurer's tables using geometric smoothing techniques or moving averages.

The most significant change since 30 June 2008 was an increase in assumed trauma rates for the current range of risk business.

Unit price growth is assumed to be equal to the assumed investment earning rates less tax and asset based charges for each product.

Projected future rates of mortality for insured lives are based on the standard industry table NZ97 for SACL and the IA90/92 mortality table for CMLA. Annuitant mortality was assumed to be a proportion of the PMA92 and PMF92 tables. These are then adjusted by comparing the standard tables with the Life Group's own experience using geometric smoothing techniques or moving averages. For annuity business, an adjustment is also made for mortality improvements prior to and after the valuation date.

21


For the year ended 30 June 2009 2008

3 Actuarial Policies and Methods (continued)

Future rates of discontinuances classified between risk and savings policies in aggregate are:

The Colonial Mutual Life Assurance Society Limited - New Zealand Branch Whole of Life and Endowment Insurance 4% 4%Term Life Insurance 9% 8%Trauma Insurance 10% 11%Disability Income Insurance 8% 9%Wholesale Investment Account - 20%

Sovereign Assurance Company LimitedRisk Policies 13% 13%Savings Policies 9% 9%Participating Policies 4% 4%

(h) Basis of Calculation of Surrender Values

(i) Participating business

Assumed future bonus rates per annum for the major classes of individual participating business were:

The Colonial Mutual Life Assurance Society Limited - New Zealand Branch Endowment insurance policies Bonus rate on sum assured 0.30% 0.70%

Bonus rate on existing bonus 0.30% 0.70%

Whole of life policies Bonus rate on sum assured 0.40% 0.80%Bonus rate on existing bonus 0.40% 0.80%

Sovereign Assurance Company LimitedEx-Prudential policies Bonus rate on sum assured 0.90% 2.00%

Bonus rate on existing bonus 0.90% 2.00%

Ex-NZI policies Bonus rate on sum assured 0.18% 1.00%Bonus rate on existing bonus 0.35% 2.00%

(j) Impact of Changes in Assumption

$ millions

Assumption ChangeMarket related changes to discount rates 75 (7)Non-market related changes to discount rates (15) - Mortality and morbidity 64 - Discontinuance rates (86) 2 Maintenance expenses (12) (1)Other assumptions (12) (3)

Assumption changes that have an effect on Life Insurance Contract Liabilities have an equal and opposite effect on Profit.

Life Group

Effect on Future Profit Margins

Effect on Life Insurance Contract Liabilities

Refer to Note 1(n) for an explanation of the treatment of changes in actuarial assumptions on Life Insurance Contract Liabilities. Theimpact of changes in actuarial assumptions made at 30 June 2009 are as follows:

Surrender values are based on the provisions specified in the policy contract. There have been no changes to surrender bases during the year (or the prior year) which would materially affect the valuation result.

For most participating business, bonus rates are set such that, over long periods, the returns to policyholders are commensurate with the investment returns achieved on the relevant assets, together with other sources of profit arising from this business. Distributions are split between policyholders and shareholders with the valuation allowing for shareholders to share in distributions at a maximum allowable rate of 20% (30 June 2008 20%).

In applying the policyholders' share of profits to provide bonuses, consideration is given to equity between generations of policyholders and equity between the various classes and sizes of policies in force. Assumed future bonus rates included in Life Insurance Contract Liabilities were set such that the present value of Life Insurance Contract Liabilities equates to the present value of assets supporting the business together with assumed future investment returns, allowing for the shareholder's right to participate in distributions.

Ex-Metropolitan Life participating products are treated in the same manner as other investment account contracts. The supportablebonus concept does not apply. Bonus rates were assumed to be 0% for 30 June 2009 (30 June 2008 1%)

22


$ millionsFor the year ended 30 June 2009 2008

4 Net Profit after Taxation

Net Profit after Taxation arose from:

Planned Margins of Revenues over Expenses 60 56 Difference between Actual and Assumed Experience 7 11 Losses on Groups of Related Products 4 - Effects of Changes in Underlying Assumptions 9 4

80 71

Planned Margins of Revenues over Expenses 11 15 Difference between Actual and Assumed Experience 3 (3)

14 12 Investment Earnings on Assets in Excess of Life Insurance and Investment Contracts Liabilities 27 27 Total Life Activities 121 110

Finance Costs (11) (43)Other 23 36

12 (7)Net Profit after Taxation 2 133 103

5 Premium Income

Total PremiumsLife Insurance Contract Premiums - disclosed in Income Statement 502 448

22 80 102 Total Premiums 582 550

6 Reinsurance

Reinsurance Recoveries - Life Insurance Contracts 30 30 Portfolio Reinsurance Recoveries 13 14 Reinsurance Recoveries - Life Investment Contracts 19 18 Total Reinsurance Income 62 62

Reinsurance Risk Premiums - Life Insurance Contracts 38 40 Portfolio Reinsurance Expenses 13 14 Reinsurance Expenses - Life Investment Contracts 19 18 Total Reinsurance Expenses 70 72

The disclosure of the components of operating profit after income tax expense are required to be separated between policyholders’ and shareholders' interests. We have included only one column, as any policyholder profits are an expense of the Group and not attributable to the shareholder.

Non-life Activities

Life Group

The Life Group has also entered into a number of surplus reinsurance arrangements covering mortality and morbidity risks.

Life Investment

Life Insurance

The Life Group has reinsurance agreements with three reinsurance companies in respect of all regular premium policies issued by SACL prior to January 2001 and all policies issued by Metropolitan Life. The reinsurance of policies is principally structured on a modified risk premium co-insurance basis. In addition, risk premiums are paid in relation to benefits reinsured. Profits arising to the reinsurers on this business are shared with the Life Group.

The Life Group has reinsured 93.1% of all Metropolitan Life business (30 June 2008 93.1%). Policy reserves are deposited back by the reinsurers.

The amounts repayable to the reinsurers under these agreements are subordinated to the claims of policyholders.

Life Investment Contract Deposit Premiums - disclosed in Life Investment Contract Liabilities

23



7 Investment Income

Life Insurance ContractsIncome from:Equity Securities (99) (68)Fixed Interest Securities 77 99 Mortgage Investments 1 1 Loans on Policies 3 3 Property Investments (8) (12)

(26) 23

Life Investment ContractsIncome from:Equity Securities (102) (78)Fixed Interest Securities 31 26 Property Investments (11) (7)

(82) (59)

Other Investment IncomeIncome from:Interest on Cash at Bank 3 2 Interest on Interest Rate Swaps and Annuity (13) 6 Other Investments 1 1

(9) 9

Total Investment IncomeIncome from:Equity Securities (201) (146)Fixed Interest Securities 108 125 Mortgage Investments 1 1 Loans on Policies 3 3 Property Investments (19) (19)Other Investments (9) 9 Total Investment Income 2 (117) (27)

Income from Equity Securities includes distributions from unit trusts.

8 Other Income

Revaluation of Borrowings and SwapsNet Gain / (Loss) from Foreign Exchange Revaluation of Borrowings 11 (52)Net (Loss) / Gain from Movement in Fair Value of Swaps (58) 77

(47) 25

Other IncomeManagement and Other Fees 28 76 Use of Money Interest 5 - Income from Financing Arrangements 2 1 Total Other Income 2 35 77

Included within Equity Securities is dividend income of $30m (30 June 2008 $50m), included within Total Investment Income is interest income of $57m (30 June 2008 $90m) and included within Total Investment Income are net realised and unrealised losses of $206m (30 June 2008 losses of $168m) including net realised and unrealised losses on Derivative Instruments of $123m (30 June 2008 losses of $95m).

Life Group

Included within Management and Other Fees is income from the provision of Fiduciary (Asset Management) services of $7m (30 June 2008 $32m).

Swaps are used to mitigate the interest rate and currency risk inherent in the Life Group's borrowings. These swaps are recognised at fair value whereas the borrowings to which they relate are recognised at amortised cost. It is intended that these swaps will be held to maturity and hence all fair value movements are eventually expected to fully reverse.

24



9 Claims, Surrenders and Maturities

Life Insurance Contracts Death, Disability and Medical Claims 244 225 Maturities 32 35 Surrenders 38 48 Annuities 6 6

320 314

Risk Claims - disclosed in the Income Statement 318 299 Deposit Claims - disclosed in Life Insurance Contract Liabilities 22 2 15

320 314

Life Investment Contracts Deaths 3 3 Maturities - 4 Surrenders 169 185

172 192

Deposit Claims - disclosed in Life Investment Contract Liabilities 22 172 192

Total Life Claims 492 506

Death, Disability and Medical Claims 247 228 Maturities 32 39 Surrenders 207 233 Annuities 6 6 Total Life Claims 492 506

Risk Claims - disclosed in the Income Statement 318 299 Deposit Claims - disclosed in Life Liabilities 174 207 Total Life Claims 492 506

10 Commission and Management Expenses

Life Insurance Contract Expenses

Acquisition Costs:Commission and Other Direct New Business Costs 93 78 Management Expenses 47 46

140 124 Maintenance Costs:

Commission 49 41 Management Expenses 43 38

92 79 Investment Management Costs 6 8 Total Life Insurance Contract Expenses 238 211

Life Investment Contract Expenses

Acquisition Costs:Commission and Other Direct New Business Costs 1 1 Management Expenses 1 1 Deferred Acquisition Cost Amortisation 3 3



11 15 Investment Management Costs 6 8

22 28 Total Life Investment Contract Expenses 260 239

Life Group

25



10 Commission and Management Expenses (continued)

Life Expenses

Acquisition Costs:Commission and Other Direct New Business Costs 94 79 Management Expenses 48 47 Deferred Acquisition Cost Amortisation 3 3



103 94 Investment Management Costs 12 16 Total Life Expenses 260 239

Non-Life Expenses:

Management Expenses: Superannuation 1 1 Management Expenses: Asset Management 2 67 Other Expenses 7 7 Total Non-Life Expenses 10 75 Total Commission and Management Expenses 2 270 314

Additional DisclosuresOperating Lease Costs 5 7 Loss on disposal of Internally Developed Software 2 - Impairment

Leasehold Improvements - (1)Intangible Assets - 9

Amortisation of Intangible AssetsInternally Developed Software 3 - Other - 1

DepreciationLeasehold Improvements 2 3 Office Equipment, Furniture and Fittings & Computer Equipment 3 2

Employee Benefits Expense - Wages and Salaries 68 104 Fiduciary Expenses (Asset Management) 12 10

11 Auditor's Remuneration

PricewaterhouseCoopers is the appointed auditor of the Life Group.

Audit and audit related service fees paid to PricewaterhouseCoopers for the year ended 30 June 2009 were $984k (30 June 2008 $1,328k). Fees incurred for Other Services were $12k (30 June 2008 $66k), including fees for other assurance related services of $53k (30 June 2008 $104k).

Life Group

26



12 Taxation

Taxation (Benefit) / Expense comprises:Value of current year tax (losses) / profits (51) (11)Adjustment to Prior Year (1) (9)Deferred Tax - Current Year 24 49 21 Deferred Tax - Prior Year 24 2 12

(1) 13

Taxation Recognised in the Income Statement 2 5 22 Recognised in Equity: Taxation on Branch Profit Repatriated 30 (6) (9)

(1) 13

Net Profit / (Loss) before Taxation 2 90 125 Tax at the Domestic Rate of 30% (33% Comparative Periods) 27 41 Tax Impact of Income Not Subject to Taxation (149) (133)Tax Impact of Expenses Not Deductible for Tax Purposes 127 114 Taxation Expense 2 5 22

Weighted Average Applicable Tax Rate -6% 18%

13 Imputation and Policyholder Credit Accounts

$ millions ICA Group CMLA Total


Imputation Credit AccountBalance at Beginning of Year 13 19 32 Opening Balances of Associates entering the ICA Group 5 - 5 Net Income Tax Paid 53 - 53 Imputation Credits Attached to Dividends Received 16 - 16 Imputation Credits Attached to Dividends Paid (31) - (31)

Balance at End of Year 56 19 75

Policyholder Credit AccountBalance at Beginning of Year - 1 1 Movement in Policyholder Liability - 5 5 Balance at End of Year - 6 6

For the year ended 30 June 2008Audited

Imputation Credit AccountBalance at Beginning of Year 79 14 93 Net Income Tax Paid 38 9 47 Imputation Credits Attached to Dividends Received 106 1 107 Imputation Credits Attached to Dividends Paid (267) - (267)Transfer from / (to) PCA 57 (5) 52 Balance at End of Year 13 19 32

Policyholder Credit AccountBalance at Beginning of Year 57 1 58 Transfer (to) / from ICA (57) 5 (52)Policyholder Liability CMLA - (5) (5)Balance at End of Year - 1 1

Dividends paid by companies may attach imputation credits representing the New Zealand tax already paid by the company or tax group on profits. New Zealand resident shareholders may claim a tax credit to the value of the imputation credits attached to the dividends.

The Life Group (excluding CMLA) has formed an imputation group with other members of the Commonwealth Bank of Australia Group (the "ICA Group"). The closing imputation credit account balances presented below represent the imputation credits available to all members of the ICA Group.

Because a member of the ICA Group is a life insurance company, the ICA Group is required to maintain a Policyholder Credit Account ("PCA"). The closing balance in the PCA can be transferred back to an imputation credit account and therefore is available to shareholders (and shareholders of other ICA Group members).

Taxation on the Life Group's Net (Loss) / Profit before Taxation differs from the theoretical amount that would arise using the domestic rate as follows:

Life Group

27


$ millionsAs at 30 June Note 2009 2008

14 Securities

Equity SecuritiesShares in Listed Companies 198 692 Unit Trusts and Managed Funds 486 478

684 1,170

Fixed Interest Securities 14a 960 806

Mortgage InvestmentsMortgages 14b 8 9 Unit Trusts and Managed Funds - 28 Loans on Policies 14c 27 29

35 66

Property InvestmentsUnit Trusts and Managed Funds 30 71

Total Securities 1,709 2,113

Equity Securities 126 434 Fixed Interest Securities 768 646 Property Investments 15 67

909 1,147

14a Fixed Interest Securities

New Zealand Government Stock 49 59 Company Debentures 145 157 Medium Term Notes 30 30 Foreign Government Stock 730 554 Annuity Investment 6 6

960 806 Maturity Analysis:Under One Year - 16 Between One and Two Years 16 29 Between Two and Three Years 34 97 Between Three and Four Years 66 102 Between Four and Five Years 72 71 Greater than Five Years 772 491

960 806

14b Mortgages

Spectrum Plus New Zealand Mortgage Trust

Mortgage Valuations

- - 8 9 8 9

14c Loans on Policies

Maturity Analysis:Less than 12 MonthsGreater than 12 months

There is no maturity analysis presented because there are no fixed maturity dates or obligations on the policyholder to repay the loans. The loans are fully secured against customer life investment and life insurance policies.

Life Group

Included within Securities are the following investments backing Life Insurance Contract Liabilities:

A current / non current split has not been presented as Securities are liquid assets and the timing of realisation is not known.

Securities include Mortgages carried at an estimated fair value of $8m (30 June 2008 $9m). This fair value was derived using a valuation technique that uses experienced judgement to estimate the credit risk component of the valuation. The experienced judgement is not supported by observable market prices; it is based on assessments concerning economic conditions, loss experience, and the risk characteristics associated with the particular mortgages. These assessments are subjective in nature and the range of possible alternative assumptions is considered immaterial. The impact of credit risk on the fair value of mortgages as at 30 June 2009 is $1m (30 June 2008 $1m). The change in fair value due to change in the credit risk for the period ended 30 June 2009 is Nil (30 June 2008 Nil).

The Life Group sold its holdings in the Spectrum Plus New Zealand Mortgage Trust (managed and promoted by the Life Group) on 8 December 2008.

The fair value of the Annuity Investment was derived using a valuation technique that is supported by observable market prices. The maximum credit risk of the annuity investment is the carrying amount. The amount of change during the year that is attributable to changes in credit risk is Nil (30 June 2008 Nil).

As at 30 June 2009 no Securities were pledged under repurchase agreements or other arrangements (30 June 2008 Nil).

28


$ millions Life GroupAudited Audited

As at 30 June Note 2009 2008

15 Cash and Cash Equivalents

Cash at Bank and on Deposit 594 549 Foreign Currency Deposits 35 22 Total Cash and Cash Equivalents 2, 39 629 571


Non-hedge Derivatives at Fair Value through Profit or Loss

Notional and Fair Values

NotionalAs at 30 June 2009 Amount Assets Liabilities

FAIR VALUE THROUGH PROFIT OR LOSS

Exchange Rate ContractsForward Contracts - Buy 87 - 4 Forward Contracts - Sell 1,292 54 4

Total Exchange Rate Contracts 1,379 54 8

Interest Rate Swaps 1,814 53 43

Total Derivative Financial Instruments 107 51

The Life Group held the following interest rate swaps as at 30 June 2009:

Counterparty Basis Maturity Notional Amount RatesDeutsche Bank Floating for Floating Rate 25/11/2016 Pay NZD 787 BBR BKBM plus 0.68% (3.45%)

Receive AUD 700 BBR BBSW plus 1% (4.14%)

ASB Bank Floating for Fixed Rate 01/07/2010 to 30/06/2011 NZD 340 Weighted Fixed Rate (8.09%)ASB Bank Floating for Fixed Rate 01/07/2009 to 30/06/2010 NZD 347 Weighted Fixed Rate (7.70%)ASB Bank Floating for Fixed Rate 01/07/2011 to 30/06/2012 NZD 340 Weighted Fixed Rate (4.76%)

1,814

$ millions Fair Value

The Life Group enters into derivative transactions which provide economic hedges for risk exposures but do not meet the accounting requirements for hedge accounting treatment. As stated in Note 1(g), the Life Group purchases forward currency contracts as economic hedges to manage foreign exchange risk and interest rate swaps as economic hedges to manage interest rate risk. Gains or losses on the forward contracts have been recorded in Investment Income with the gains or losses on the Securities they have hedged. Swap fair values are determined using yield curves constructed from cash rates, bank bill future rates and swap rates, with the Australian dollar receive leg of the foreign currency coupon swap valued at the spot exchange rate. Gains or Losses on the interest rate swap and foreign currency coupon swap have been separately disclosed in the Income Statement with the Foreign Exchange Revaluation gains or losses on the Borrowings to which they relate.

The forward currency contracts taken out do not exceed 3 months. At balance date these contracts have varying maturity dates.

The notional amount is the contractual amount of the derivatives and provides a basis for comparison with instruments recognised on the Balance Sheet. This amount is not necessarily exchanged and does not indicate the Life Group’s exposure to credit risk. The amount predominantly acts as a reference value upon which interest payments and net settlements can be calculated and on which revaluation is based. The “Face Value” of derivative financial instruments on hand, the favourable or unfavourable market values of these instruments, and the consequent aggregate fair values of derivative financial assets and liabilities can fluctuate significantly from time to time. The fair values of derivative instruments held are set out in the following table.

29



$ millions NotionalAs at 30 June 2008 Amount Assets Liabilities

FAIR VALUE THROUGH PROFIT OR LOSS

Exchange Rate ContractsForward Contracts - Buy 44 1 - Forward Contracts - Sell 1,339 2 24

Total Exchange Rate Contracts 1,383 3 24

Interest Rate Swaps 1,814 71 1

Total Derivative Financial Instruments 74 25

17 Investments in Subsidiaries

The Life Group has an interest in the following entities:

Entity name % Nature of business

ASB Group (Life) Limited 100 Holding CompanyColonial First State Investments (NZ) Ltd 100 Investment AdministrationColonial First State Investments Managers (NZ) Limited 100 Investment AdministrationColonial Holding Company Limited (NZ Branch) 100 Financial ServicesKiwi Income Properties Limited 100 Property ManagementKiwi Property Management Limited 100 Investment AdministrationKuranda Investments Limited 50 Non-tradingSovereign Assurance Company Limited 100 Life InsuranceSovereign Financial Services Limited 100 Financial ServicesSovereign Limited 100 Holding CompanySovereign Services Limited 100 Administration ServicesSovereign Superannuation Funds Limited 100 Superannuation Scheme ManagerSovereign Superannuation Trustees Limited 1 100 Trustee CompanySST (2002) Limited 100 Non-tradingThe Colonial Mutual Life Assurance Society Limited (NZ Branch) 100 Life InsuranceWestside Properties Limited 100 Asset Leasing

1.

2.

3.

4. On 1 July 2008 the Life Group sold 100% of the ordinary capital of Aegis Limited (Investment Administration and Custody), ASB Group Investments Limited (Investment Administration and Management), Investment Custodial Services Limited (Investment Custodian) and Jacques Martin New Zealand Limited (Investment and Registry Administration) to fellow subsidiary of CBA, ASB Bank Limited (refer to Note 2 for further details).

Holdings in the Spectrum Plus New Zealand Mortgage Trust were sold on 8 December 2008. The nature of business was Investment, and the Life Group had 90% ownership as at 30 June 2008. Holdings in the Investor Wholesale New Zealand Equity Trust are below the 75% threshold where there is the ability to appoint a new manager of the Trust and control the operating and financing decisions. The nature of business was Investment, and the Life Group had 76% ownership as at 30 June 2008.

From 1 July 2008 Mortgage Holding Trust Company Limited is considered to be controlled by the Banking Group and, as such, is no longer included in the aggregated financial statements of the Life Group.

Life Group

Super Trustees of New Zealand Limited was amalgamated into Sovereign Superannuation Trustees Limited on 27 June 2008. The amalgamation did not have any impact on the net assets of the Life Group.

Fair Value

All entities were incorporated in New Zealand and have a balance date of 30 June.

30


$ millions Note Leasehold Improvements

Office Equipment, Furniture & Fittings and

Computer Equipment Total

18 Property, Plant and Equipment


Cost 38 13 51 Accumulated Depreciation (4) (8) (12)Opening Net Book Value 34 5 39

Disposal - Cost (2) (4) (6)Disposal - Accumulated Depreciation 2 4 6 Depreciation (2) (3) (5)Asset Category Reclassifications* (4) 4 - Closing Net Book Value 28 6 34

Cost 32 13 45 Accumulated Depreciation (4) (7) (11)Closing Net Book Value 28 6 34


Cost 6 28 34 Work in Progress 33 - 33 Accumulated Impairment (1) (1) (2)Accumulated Depreciation (5) (22) (27)Opening Net Book Value 33 5 38

Additions 36 2 38 Work in Progress (33) - (33)Disposal - Cost (4) (17) (21)Disposal - Accumulated Depreciation 4 16 20 Depreciation (3) (2) (5)Disposal - Accumulated Impairment - 1 1 Impairment 1 - 1 Closing Net Book Value 34 5 39

Cost 38 13 51 Accumulated Depreciation (4) (8) (12)Closing Net Book Value 2 34 5 39

Life Group

* Asset category reclassifications resulted from the finalisation of the Smales Farm fitout asset breakdown in June 2009. The fitout spend had previously all been recorded as Leasehold Improvement.

31


$ millions Note Goodwill

Internally Developed

Software Other Intangible

Assets Total

19 Intangible Assets


Cost 559 24 3 586 Accumulated Amortisation - (5) (3) (8)Accumulated Impairment - (13) - (13)Opening Net Book Value 559 6 - 565

Additions - 3 1 4 Disposal - Cost - (17) (2) (19)Disposal - Accumulated Amortisation - 2 2 4 Disposal - Accumulated Impairment - 13 - 13 Amortisation - (3) - (3)Closing Net Book Value 559 4 1 564

Cost 559 10 2 571 Accumulated Amortisation - (6) (1) (7)Accumulated Impairment - - - Closing Net Book Value 559 4 1 564


Cost 559 13 3 575 Accumulated Amortisation - (6) (2) (8)Accumulated Impairment - (4) - (4)Opening Net Book Value 559 3 1 563

Additions - 12 - 12 Impairment - (9) - (9)Disposal - Cost - (1) - (1)Disposal - Accumulated Amortisation - 1 - 1 Amortisation - - (1) (1)Closing Net Book Value 559 6 - 565

Cost 559 24 3 586 Accumulated Amortisation - (5) (3) (8)Accumulated Impairment - (13) - (13)Closing Net Book Value 2 559 6 - 565

Goodwill of $52m also arose from the purchase of Kiwi Income Properties Limited and a property management business by CFSI. This goodwill is tested for impairment based on value-in-use calculations. These calculations use cash flow projections for the CFSI's underlying assets based on the financial budgets approved by management covering a 5 year period. Cash flows beyond 5 years are extrapolated based on past performance and management's expectations for the future. The key assumptions used in the projection of cash flows are as follow: fund management fees are based on current funds under management, adjusted in future years for known movments, property management fees are based on current revenues, adjusted for inflation. The weighted average cost of capital at 30 June 2009 were 12.29 post tax and 16.93 pre-tax (30 June 2008 11.82% post tax and 15.21% pre tax). The growth rates used were 1% (30 June 2008 3.4%).

Life Group

The appraisal value methodology employed in assessing excess market value over net tangible assets of ASBGL and CMLA is deemed by management to be an appropriate proxy for determining value in use. The appraisal value is a discounted cash flow valuation, taking account of existing and future business over a 20 year period. The key assumptions used in the projection of cash flows are the same as those key assumptions used in determining policy liabilities (refer to Note 3). The discount rates used at 30 June 2009 were 10.03% for life insurance business (30 June 2008 10.43%) and 11.95% for funds management and unit linked business (30 June 2008 12.35%).

Goodwill of $507m arose in ASBGL and CMLA from the purchase of the Prudential Assurance Company in 1998 and the purchase of Sovereign Group Limited in 2001, both life insurers.

This goodwill is allocated to the Life Insurance and Superannuation cash-generating unit. Under NZ IAS 36 Impairment of Assets a cash-generating unit to which goodwill has been allocated is tested for impairment annually, and whenever there is an indication that the goodwill may be impaired. The recoverable amounts are determined based on value-in-use calculations.

32



20 Trade and Other Receivables (Current)

Agent Balances Receivables 1 1 Amounts Due from Reinsurers 11 10 Amounts Due from Related Parties 33 7 6 Investment Receivables 25 28 Other Current Assets 3 8 Outstanding Premiums 14 17 Total Trade and Other Receivables 2, 39 61 70

21 Other Assets

Deferred Acquisition Cost - Life Investment Contract Liabilities 22 25 Retirement Benefit Obligations 21a - 1

22 26

21a Retirement Benefit Obligations

Recognition of Actuarial Gains and Losses

Actuarial gains and losses are fully recognised each year.

Description of Plans


Reconciliation of Amounts Recognised in the Balance Sheet

Present Value of Funded Obligations (4) (4) (5) (5)Fair Value of Fund Assets 4 4 8 10 Surplus - - 3 5

Adjustment for Limit on the Use of Net Assets - - (3) (4)- - - 1

Specified Superannuation Contribution Withholding Tax - - - - Asset Recognised in the Balance Sheet - - - 1

Reconciliation of the Present Value of Funded Obligations

Present Value of Funded Obligations at Beginning of Year 4 5 5 5 Interest Cost - - 1 1 Benefits Paid - (1) (1) (1)Present Value of Funded Obligations at End of Year 4 4 5 5

Reconciliation of the Fair Value of Fund Assets

Fair Value of Fund Assets at Beginning of Year 4 4 10 10 Expected Return on Assets - - - 1 Actuarial Gains - 1 (1) - Benefits Paid - (1) (1) (1)Fair Value of Fund Assets at End of Year 4 4 8 10

PACNZ Pension Scheme

Sovereign Staff Retirement Fund

Life Group

A limited review for the purposes of NZ IAS 19 Employee Benefits has been carried out as at 30 June 2008 and 30 June 2009.

The Sovereign Staff Retirement Fund is a superannuation scheme with a defined benefit section and a defined contribution section, togetherwith pensioners in payment. The date of the last full triennial actuarial review of the scheme was 30 June 2007.

The Prudential Assurance Co NZ Limited Pension Scheme (PACNZ) is a defined benefit plan with only pensioners in payment now remainingin the scheme. The date of the last triennial actuarial review of the scheme was 31 March 2007.

The next triennial actuarial review of both schemes is scheduled for 31 March 2010.

33



21 Other Assets (continued)

21a Retirement Benefit Obligations (continued)

Income / (Expense) Recognised in the Income Statement

Interest Cost - - (1) (1)Expected Return on Assets - - - 1 Recognised Actuarial Gain / (Loss) - 1 (1) (1)Adjustment for Limit on the Use of Net Assets - - 1 - Superannuation Income / (Expense) - 1 (1) (1)

Actual Investment Income on Fund Assets - - - (1)

Movement in the Net (Liability) / Asset Recognised in the Balance Sheet

Net (Liability) / Asset at Beginning of Year* - (1) 1 2 Net Income / (Expense) Recognised in the Income Statement - 1 (1) (1)Net (Liability) / Asset at End of Year* - - - 1

* Inclusive of specified superannuation contribution withholding tax.

The PACNZ Pension Scheme is included under Other Liabilities within Employee Entitlements.

Fund AssetsThe distribution of Fund Assets at the Balance Sheet date is as follows:

Australasian Shares n/a n/a 19% 19%Global Shares n/a n/a 41% 40%Global Fixed Interest 100% 100% 36% 36%Cash n/a n/a 4% 5%

Fair Value of Fund Assets

Discount Rate (before tax and expenses) 4.20% pa 6.40% pa 4.20% pa 6.43% paExpected Return on Fund Assets 4.20% pa 6.40% pa 6.00% pa 7.86% paRate of increase in Salaries n/a n/a 3.50% pa 3.50% paRate of increase in Pensions 2.00% pa 2.50% pa 2.00% pa 2.50% pa

Additional salary increases in respect of promotion are assumed.

Historical Information

$ millions 2009 2008 2007

For the year ended 30 June


Present Value of Funded Obligations (4) (4) (5)Fair Value of Fund Assets 4 4 4 Fund Deficit - - (1)

Assumptions Change on Fund Liabilities - Gain - 1 -


Present Value of Funded Obligations (5) (5) (5)Fair Value of Fund Assets 8 10 10 Fund Surplus 3 5 5

Assumptions Change on Fund Liabilities - (Loss) / Gain - - (1)



Principal Actuarial Assumptions at the Balance Sheet Date (expressed as weighted averages):

The expected return on assets assumption is determined by weighting the expected long-term return for each asset class by the target allocation of assets to each asset class. The returns used for each asset class are net of investment tax and all expense.

34


$ millionsFor the year ended 30 June Note 2009 2008

22 Life Insurance Contract Liabilities and Life Investment Contracts

Life Insurance Contract Liabilities

Opening Life Insurance Contract Liabilities 746 924 Maturities and Surrenders 9 (2) (15)Recognised in Income Statement* (214) (163)Closing Life Insurance Contract Liabilities 530 746

Life Insurance Contract LiabilitiesAmounts due for Settlement within 12 months (21) (52)Amounts due for Settlement over 12 months 551 798

530 746

Life Insurance Contract Liabilities - Recognised in Income Statement (214) (163)Increase in Reinsurance Assets - Recognised in Income Statement 23 (3) (1)Decrease in Deposited Reserves - Recognised in Income Statement 23 (1) (4)Net Change in Life Insurance Contract Liabilities (218) (168)

Life Insurance Contracts with a Discretionary Participation Feature - the amount of the liabilities that relates to guarantees 770 625 Investment Linked Contracts - the amount of the liabilities subject to investment performance guarantees 12 13

Life Insurance Contract Liabilities contain the following components:

Future Policy Benefits 5,020 4,473 Future Bonuses 66 288 Future Expenses 1,590 1,437 Future Planned Margins of Revenues over Expenses 913 853 Future Premiums (6,863) (6,158)Unvested Policyholder Benefits 56 58 Deferred Taxation Liability (252) (205)

530 746

Life Insurance Contract Liabilities Future Net Cash Inflows

Up to One year 162 123 One to Five years 495 347 Later than Five years 1,139 943 Total 1,796 1,413

Life Investment Contracts

Opening Life Investment Contracts 1,112 1,298 Deposit Premium 5 80 102 Maturities and Surrenders 9 (172) (192)Recognised in Income Statement (103) (96)Closing Life Investment Contracts 917 1,112

Opening Deferred Income Reserve 74 82 Recognised in Income Statement (7) (8)Closing Deferred Income Reserve 67 74

984 1,186

Life Investment ContractsAmounts due for Settlement within 12 months 41 41 Amounts due for Settlement over 12 months 943 1,145

984 1,186

The maturity value of these financial liabilities is determined by the fair value of the linked assets at maturity date.

Life Group

* The item 'Recognised in Income Statement' is stated gross of reinsurance. The reinsurance figures recognised in the Income Statement are included in Note 23.

Movements in Life Investment Contract valuations reflect maturities, surrenders, claims experience and investment performance. The impacton the fair value of Life Investment Contracts due to changes in credit risk is Nil (30 June 2008 Nil), except to the extent that the market valueof investments backing the Life Investment Contracts is affected by changes in credit risk. Any such credit risk impact is reflected in themovement of Securities balances during the year.

The table above shows the estimated timing of future net cash flows resulting from insurance contract liabilities. This includes future surrenders, claims and maturity benefits, and bonuses, offset by expected future premiums and reinsurance recoveries. All values are discounted to the reporting date using the assumed future investment earning rate for each product.

35



23 Reinsurance Assets and Liabilities

Liabilities ceded under ReinsuranceBalance at Beginning of Year 60 59 Increase in Reinsurance Assets recognised in Net Change in Life Insurance Liabilities reported in the Income Statement 22 3 1 Balance at End of Year 63 60

Liabilities ceded under ReinsuranceAmounts due for Settlement within 12 months 9 7 Amounts due for Settlement over 12 months 54 53

63 60

Deposited Reserves (Life Insurance Component)Balance at Beginning of Year 40 44 Decrease in Deposited Reserves recognised in Net Change in Life Insurance Liabilities reported in the Income Statement 22 (1) (4)Balance at End of Year 39 39 40

Deposit Reserves (Life Insurance Component)Amounts due for Settlement within 12 months 2 2 Amounts due for Settlement over 12 months 37 38

39 40

24 Deferred Taxation Liability

Balance at Beginning of Year 103 70 Deferred Taxation Balance of Discontinued Operations 5 - Taxation Expense recognised in the Income Statement 12 51 33 Total Deferred Taxation Liability 159 103

Deferred Taxation relates to:Depreciation 1 (6)Holiday Pay (1) (1)Premiums Paid in Advance 2 3 Deferred Acquisition Costs and Other Intangible Assets 7 8 Life Insurance Contract Liabilities and Life Investment Contracts 231 183 Unrealised Loss on Investments (9) (12)Convertible Notes and Related Derivative Financial Instruments (102) (101)Accrued Expenses and Provisions 30 29 Total Deferred Taxation Liability 2 159 103

Deferred Taxation recognised in the Income Statement:Provision for Impairment Loss - 1 Depreciation 2 (4)Premiums Paid in Advance (1) 2 Deferred Acquisition Costs and Other Intangible Assets (1) (1)Life Insurance Contract Liabilities and Life Investment Contracts 48 39 Decrease / (Increase) in Unrealised Depreciation of Investments 3 (32)Convertible Notes and Related Derivative Financial Instruments (1) 20 Accrued Expenses and Provisions 1 8 Total Deferred Taxation recognised in the Income Statement 12 51 33

Life Group

The amount of Deferred Tax Liability, exclusive of Convertible Notes, that is expected to be recovered / settled after more than 12 months is $200m (30 June 2008 $156m). The Deferred Tax Benefit on Convertible Notes settled after more than 12 months is $87m (30 June 2008 $104m).

On issuance of the Convertible Notes, a Deferred Tax Asset ($135m) was created to recognise the future benefit of the debt component of the Convertible Notes. The tax return includes the coupon interest paid as deductible in full on an accruals basis. For accounting purposes, the coupon payments are split between interest and principal repayment of the debt component of the Convertible Notes. The Deferred Tax Asset will reduce and be amortised as a current tax benefit as the debt component reduces. The 30 June 2009 value remaining in Deferred Tax is $106m (30 June 2008 $122m).

36



25 Borrowings

Convertible Notes 353 407 Total Borrowings 353 407

Current portion 61 30 Non-current portion 292 377

39 353 407

26 Trade and Other Payables

Agent Balances 3 2 Amounts Due to Reinsurers 3 1 Amounts Due to Related Parties 33 3 9 Dividends and Head Office Payable 4 7 Employee Entitlements 15 17 Expense Creditors 11 24 Interest Payable 3 8 Investment Creditors 4 15 Prepaid Premiums 12 15 Outstanding Claims 46 40 Total Current Trade and Other Payables 104 138

Deferred Fees* 13 15 Total Non-Current Trade and Other Payables 13 15

Total Trade and Other Payables 2, 39 117 153

27 Provisions

Information Systems 27a - 1 Marketing Costs 27b - - Systems Upgrade 27c - 5 Balance at End of Year (All Current) 2 - 6

27a Information Systems Balance at Beginning of Year 1 2 Less: Amounts Written Back Unused 1 1 Balance at End of Year - 1

Life Group

While any MCNs are outstanding, ASBGL must, 10 years after the transition to MCNs (or earlier if an early conversion event occurs, which includes ASBGL at its sole discretion electing to convert) apply the face value of any outstanding MCNs to subscribe for preference shares (or alternative securities with the same rights and benefits) on the basis that one MCN will convert into one preference share (or alternative security). The preference shares are perpetual in nature. Dividends on the preference shares will be paid quarterly unless the directors of ASBGL resolve that it would be imprudent to do so.

The liability component of the Convertible Notes was initially measured at the value of the discounted contractual cash flows (NZD408m).

On 10 October 2006, ASB Group (Life) Limited ("ASBGL") issued 7 million AUD100 notes (AUD700m, NZD787m) to two external counterparties ("Convertible Notes"). The Convertible Notes carry a contractual obligation to make quarterly interest payments in AUD of BBSW (Bank Bill Swap Rate, denominated in AUD) plus a margin of 1% per annum, for a maximum of 10 years.

The Convertible Notes will be assigned to Colonial Holding Company Limited (“CHC”), also a subsidiary of CBA, on 10 October 2016 (or at an earlier date if a certain specified event occurs).

Following the assignment of the Convertible Notes to CHC, on 25 November 2016 (or such earlier date agreed between the Life Group and CHC), the terms and conditions of the Convertible Notes will change, with the Convertible Notes then being labelled as Mandatory Convertible Notes (“MCNs”). Each MCN will have a face value equal to the NZD equivalent of AUD100 and will bear interest quarterly in arrears at the rate of BKBM (Bank Bill Mid Rate, denominated in NZD) plus a margin. The MCNs will be perpetual securities and will only be repaid if they are redeemed by ASBGL.

The fees are to compensate the Life Group for additional costs to be incurred over the terms of the restructuring arrangements and are proportionately rebatable if the related debt is assigned or novated prior to the contracted maturity. The fees have been deferred and amortised over the contractual terms of the relevant arrangement on a basis that closely matches a notional effective interest rate.

This provision is for anticipated costs relating to the alignment of multiple business systems and processes.

There have been no defaults on payments of interest or principal during the year ended 30 June 2009 (30 June 2008 Nil).

*Fees were received as part of the funding restructure which incorporated the issuing of the Convertible Notes (refer to Note 25).

37



27 Provisions (continued)

27b Marketing CostsBalance at Beginning of Year - 2 Less: Costs Incurred - 2 Balance at End of Year - -

27c Systems UpgradeBalance at Beginning of Year 5 - Additional Provided - 5 Less: Provisions for Discontinued Operations 5 - Balance at End of Year - 5

28 Contributed Capital - Ordinary Shareholder

Issued Ordinary Share CapitalBalance at Beginning of Year - 5 Repayment of Capital - (5)Balance at End of Year - -

29 Contributed Capital - Convertible Notes

Convertible NotesBalance at Beginning of Year 503 503 Balance at End of Year 503 503

30 Retained Earnings

Balance at Beginning of Year 115 31 Net Profit after Taxation 2, 4 133 103 Ordinary Dividend (23) - Foreign Investor Tax Credit 3 - Branch Profit Repatriated (21) (28)Taxation on Branch Profit Repatriated 12 6 9 Balance at End of Year 213 115

31 Head Office Contribution

Balance at Beginning of Year 300 300 Balance at End of Year 300 300

32 Capital Management

The Capital of the Life Group is managed separately for ASBGL and CMLA, CFSIM, CFSI and its subsidiaries and CHC NZ Branch.

ASBGL and CMLA

The objectives of ASBGL and CMLA with regard to management of capital adequacy are:

(i)

(ii)(iii)

to maintain a strong capital base to cover the inherent risks of the business; and

Head Office Contribution represents amounts advanced by Colonial Holding Company Limited to its New Zealand branch.

to comply at all times with the solvency requirements set out in the New Zealand Society of Actuaries Professional Standard No. 5 Solvency Reserving for Life Insurance Business (PS5);

to support the future development and growth of the business to maximise shareholder value.

Life Group

There were no changes to Head Office Contribution during the year ended 30 June 2009.

On 30 June 2008 Colonial First State Investment Managers (NZ) Limited repaid 4,999,999 shares to its parent company. One fully paid Ordinary Share remained on issue.

The provision was held for ASB Group Investments Limited which was sold to ASB Bank Limited on 1 July 2008 (related to the initiation ofa Kiwisaver scheme).

The provision was held for ASB Group Investments Limited, which was sold to ASB Bank Limited on 1 July 2008.

On 10 October 2006 ASBGL issued Convertible Notes, the key terms of which are disclosed in Note 25. The $379m equity component of these Convertible Notes is the residual value after deducting the fair value of the liability component from the fair value of the Convertible Notes as at 10 October 2006. Deferred taxation of $124m on Convertible Note issued was recognised in equity in the 2007 tax year.

Share Capital includes 100 ordinary shares paid to $1.00 and 10,000,000 unpaid ordinary shares in ASBGL and CMLA (30 June 2008 100 ordinary shares paid to $1.00 and 10,000,000 unpaid ordinary shares) and 200,000 fully paid Ordinary Shares in Colonial First State Investment (NZ) Limited (30 June 2008 200,000 fully paid Ordinary Shares).

All Ordinary Shares have equal voting rights and share equally in dividends and profit on winding up in the respective companies.

38



32 Capital Management (continued)

ASBGL and CMLA

The target surplus as at 30 June 2009 was $95m (30 June 2008 $95m).

The solvency position of the life insurance entities is as follows:

Sovereign Assurance Company LimitedEquity of Shareholder 582 498 Less: Equity retained for solvency purposes 463 401 Equity Available for Distribution 119 97

The Colonial Mutual Life Assurance Society Limited - New Zealand BranchEquity of Shareholder 37 31 Less: Equity retained for solvency purposes 14 13 Equity available for Distribution 23 18

The equity available for distribution was determined as follows:

(a)

Sovereign Assurance Company LimitedInsured life mortality: +10% Insured life mortality: +20%Trauma claims: +30%Disability income active life claims: +50% Disability income active life claims: +50%

Disability income claims in payment: +30%

Servicing costs: 2.5% margin Servicing costs: 5% marginVoluntary discontinuances: 25% margin Voluntary discontinuances: +25% to +75%The margins are unchanged from 30 June 2008. The margins are unchanged from 30 June 2008.

(b)

(c)

(d)

(e)

(f)

(g)

CFSI and CFSIM

CHC

CHC considers the Head Office Contribution from CHC Limited to be capital for management purposes. CHC has no externally imposedcapital requirements. CHC's objectives when managing capital are to safeguard CHC's ability to continue as a going concern in order toprovide returns to Head Office and benefits to other stakeholders. There have been no material changes in CHC's management of capitalduring the year ended 30 June 2009.

Life Group

For each related product group a prudential reserving liability was calculated. The prudential reserving liability was determined in the same manner as the best estimate policy liability but with prudential reserving assumptions. The prudential reserving assumptions are derived by modifying the best estimate assumptions by applying margins for adverse deviations from expected experience. The margins applied include:

For each related product group the greater of the amount in (a) and the total of the current termination value of all policies in the related product group was taken.

The amount in (b) was increased by an expense reserve based on the non-commission acquisition costs incurred in the previous year.

Investment Earnings: the valuation discount rates as set out in Note 3 (a) were used, but with a maximum of the mid swap rate.

Investment Earnings: the valuation discount rates as set out in Note 3 (a) were used, but with a maximum of the Australian mid swap rate.

The respective Boards of Directors have ultimate responsibility for capital management, and approve capital policy and minimum capital levels and limits. Minimum capital levels are set based on maintaining a target surplus in excess of that required by PS5. The level of target surplus takes account of management assessments of actual risk and forecasts / stress testing of future capital requirements. Capital is defined as the Shareholders' Equity in the Life Group.

The Colonial Mutual Life Assurance Society Limited - New Zealand Branch

The amount in (c) was increased by the liability to other creditors of the life insurance funds, excluding debt subordinated to the interests of policyholders.

ASBGL and CMLA actively monitor their capital adequacy and report this on a regular basis to senior management and their respectiveBoards. This includes forecasting capital requirements so that they can be executed in a timely manner.

The amount in (f) was compared with the assets of the fund to determine the equity available for distribution.

The amount in (d) was increased by a resilience reserve calculated to allow for adverse changes in investment returns and exchange rates.

The amount in (e) was increased by a reserve for inadmissible assets, subject to look through provisions.

Termination rates for disability income claims in payment: -25%

CFSI considers Ordinary Share Capital and Retained Earnings to be capital for management purposes. CFSI has no externally imposedcapital requirements. The respective Directors of CFSI and CFSIM are ultimately responsible for the management of capital. CFSIsobjectives when managing capital are to safeguard CFSI's ability to continue as a going concern in order to provide returns to the shareholderand benefits to other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. There have been no materialchanges in CFSI's management of capital during the year ended 30 June 2009.

39


33 Related Party Transactions and Balances

Banking GroupAnnuity Investment

Cash and Deposits

Securities

Derivative Transactions

Expenses and Services

Insurance Commissions

Funds Management and Administration

Mortgages

Taxation

Other Fellow CBA Subsidiaries

Borrowings

Securities

Investment Management

Transactions with Parent Company (CBA)

The Life Group received $14m (30 June 2008 $14m) from the Banking Group for the recovery of costs relating to the origination of mortgages.

The Trusts managed and administered by the Life Group prior to 1 July 2008 had foreign exchange forward contracts with the Banking Groupwith a face value of $776m as at 30 June 2008. There were net unrealised gains on the contracts of losses of $22m as at 30 June 2008.

The Life Group has foreign exchange forward contracts with the Banking Group with a face value of $1,379m (30 June 2008 $1,383m) andinterest rate swaps with a face value of $1,027m (30 June 2008 $1,027m). There are net unrealised gains on these contracts of $2m (30 June2008 losses of $14m). The Life Group paid net interest expense of $15m (30 June 2008 received net interest income of $10m) on interest rateswaps with the Banking Group.

The Life Group holds Securities issued by the Banking Group of $33m (30 June 2008 $34m) on which it received interest income of $2m (30June 2008 Nil). The Life Group holds Securities issued by Trusts managed by the Banking Group of $46m (30 June 2008 $120m) on which itreceived interest and dividends on Securities issued by these Trusts of $1m (30 June 2008 $13m).

The Life Group received $3m (30 June 2008 $3m) for the administration of Trusts managed by the Banking Group. Prior to 1 July 2008 the LifeGroup made payments to the Banking Group for the distribution of fund management products. Receipts of $9m were received from the NZMortgage Income Fund of which $8m were paid to the Banking Group for the year ended 30 June 2008. Payments of $5m were made to theBanking Group for the distribution of fund management products for the year ended 30 June 2008.

The Life Group paid $12m (30 June 2008 Nil) to the Banking Group for the provision of investment management services.

The Life Group has paid insurance commissions of $33m to the Banking Group (30 June 2008 $24m).

The Life Group paid Nil (30 June 2008 $2m) to First State Investment Management (UK) Limited for the provision of investment management services.

Net receipts of $56m (30 June 2008 net payments of $22m) were received from the Banking Group relating to the utilisation of tax relateditems. Use of Money Interest of $4m was received from the Banking Group (30 June 2009 Nil).

The Life Group holds Securities issued by other fellow CBA subsidiaries of $67m (30 June 2008 $26m) on which it received interest anddividends of $2m (30 June 2008 $1m).

The Life Group paid Nil (30 June 2008 $1m) to Colonial First State Investments Limited for the provision of investment management services.

The Life Group holds CBA Equity Securities of $4m (30 June 2008 $9m) of which it received dividends during the year of Nil (30 June 2008 Nil).

Fees of $13m (30 June 2008 $15m) received from Colonial Holding Company Limited in relation to debt restructuring arrangements (refer to Note 25) remain deferred at 30 June 2009 and will be amortised over the remaining term of the arrangement.

The ultimate parent of the Life Group is CBA. The Commonwealth Bank Group refers to CBA and the various companies and other entities owned and controlled by CBA. The CBA New Zealand Banking Group ("the Banking Group") includes CBA New Zealand Branch (the Registered Bank which holds the banking licence for the purposes of this disclosure statement) and various wholly owned CBA subsidiaries controlled by the CBA New Zealand Branch, as well as ASB Bank Limited and its controlled entities, ASB Holdings Limited (the immediate parent of ASB Bank Limited) and ASB Funding Limited, a wholly owned subsidiary of ASB Holdings Limited.

During the year ended 30 June 2009, the Life Group has entered into, or had in place various financial transactions with members of the Commonwealth Bank Group, and other related parties. Arrangements with related parties were conducted on an arm's length basis and on normal commercial terms, and within the Life Group's approved policies. Transactions processed during the year ended 30 June 2009 are set out below.

Investment Management

The Life Group has an annuity investment with the Banking Group (refer to Note 14). During the year the Life Group received interest incomeof $1m (30 June 2008 $1m).

The Life Group paid the Banking Group $17m (30 June 2008 $23m) for the provision of services: including human resources, legal, internalaudit, property management, strategic research, finance, executive, computer leasing and information technology support. The Life Groupmade payments on behalf of the Banking Group of $10m (30 June 2008 $39m), for management expenses incurred on behalf of the BankingGroup.

The Life Group has cash balances and deposits of $601m with the Banking Group (30 June 2008 $537m) on which it received interest incomeof $37m (30 June 2008 $47m). These deposits are held on normal commercial terms and conditions. Prior to 1 July 2008 the Life Groupmanaged and administered a number of Superannuation, Unit and other Trusts. These trusts held some of their funds with the Banking Group.Total deposits held with the Banking Group as at 30 June 2008 were $1,073m. Interest income was received on Trust deposits of $94m for theyear ended 30 June 2008.

40



33 Related Party Transactions and Balances (continued)

Subsidiaries acting as Fund Managers

Transactions with Subsidiaries

Balances with Related Parties:

Commonwealth Bank of Australia and subsidiaries:Banking Group (3) (8)First State Investment Management (UK) Limited - (1)

Balances with Trusts Administered and Managed by the GroupComplete Investor Plan Super 4 3 ASB Unit Trusts - 2

1 (4)Disclosed as follows:Amounts Due to Related Parties 26 (3) (9)Amounts Due from Related Parties 20 7 6

4 (3)

34 Directors and Key Management Personnel

Key Management Compensation Short Term Employee Benefits 9 10

35 Leasing Commitments

The following non-cancellable operating lease commitments existed at the end of the year:

Within One Year 5 5 Between One and Five Years 16 19 Over Five Years 49 54 Total Leasing Commitments 70 78

36 Contingent Liabilities and Capital Commitments

Contingent Liabilities

Capital Commitments

Life Group

On 6 October 2005, the Life Group signed an 18 year lease on Sovereign House, its Head Office premises at Smales Farm, Auckland. Thelease term commenced in October 2007. A fixed rate of increase will be applied to the annual lease cost. The Life Group has a number ofother properties under operating leases. The leases have a variety of lease periods and a number of the leases contain options to renew.Payment made under operating leases are charged to the Income Statement on a straight line basis over the period of the lease.

SACL has received assessments from the Inland Revenue Department ("IRD") in relation to the tax treatment of reinsurance arrangements inthe 2000 to 2004 tax years. SACL has lodged proceedings in the High Court to challenge the 2000 to 2002 reassessments and expects tolodge proceedings challenging the 2003 and 2004 reassessments shortly. The IRD is disputing the tax treatment of the reinsurancearrangements in later years and is expected to issue reassessments in respect of them in due course.

In the previous year, Subsidiaries of the Life Group acted as fund managers for superannuation schemes, the details of which have beendisclosed in Note 37.

Refer to Note 17 for details of the Life Group's Interests in Subsidiaries.

In addition to those disclosed elsewhere in these financial statements, the Life Group has generated debtor and creditor balances with RelatedParties in the ordinary course of operations during the year. The balances are settled on a regular basis. The amounts due to / (from) the LifeGroup by / (to) related parties are as follows:

All of the Life Group's leases are classified as operating leases as a significant portion of the risks and rewards of ownership are retained by the lessor.

The Life Group has no other transactions or balances with Key Management Personnel. Key Management Personnel are defined as permanent members of the Executive Management Committee.

The Life Group holds listed securities which comprise units in Kiwi Income Property Trust of $3m (30 June 2008 $4m). The Trust's units are listed on the New Zealand Stock Exchange.

Based on independent tax and legal advice, SACL is confident the tax treatment it has adopted for the transactions is correct.

There are no other material contingent liabilities as at 30 June 2009 (30 June 2008 Nil).

There are no capital commitments as at 30 June 2009 (30 June 2008 $1m).

Should the IRD issue reassessments for all relevant tax years, the estimated maximum potential total tax liability (including use of moneyinterest and excluding penalties) as at 30 June 2009 would be $53m (30 June 2008 $49m). The increase in the estimated liability since 30June 2008 is due to additional arguments raised by the IRD in relation to the 2003 and later tax years and increased use of money interest.This increase is offset in part by unrelated matters resolved in SACL's favour for the 2004 to 2006 years.

41


Life Insurance andInvestment Asset

$ millions Management Management Other Total

37 Financial Reporting by Segments

Primary Segment Information - Business

Operating Income Derived from Outside Life Group 412 - 23 435 Total Operating Income 412 - 23 435 Net Profit before Taxation 78 - 12 90

Tax Assets 60 - - 60 External Non Tax Assets 3,110 - 79 3,189 Total External Assets 3,170 - 79 3,249

Assets Under Management (Not Consolidated) - - 1,912 1,912 Assets Under Administration (Not Consolidated) 61 - - 61

Tax Liabilities 159 - - 159 External Non Tax Liabilities 2,070 - 4 2,074 Total External Liabilities 2,229 - 4 2,233

Acquisition of Property, Plant & Equipment, Intangible Assets, & Other Non-current Assets 4 - - 4 Depreciation & Amortisation Expense 8 - - 8

Operating Income Derived from Outside Life Group 513 62 25 600 Inter-Segment Operating Income - (15) - (15)Total Operating Income 513 47 25 585 Net Profit before Taxation 127 (16) 14 125

Tax Assets 58 6 2 66 External Non Tax Assets 3,423 17 78 3,518 Total External Assets 3,481 23 80 3,584

Inter-segment Assets 3 2 - 5

Assets Under Management (Not Consolidated) - 2,545 2,066 4,611 Assets Under Administration (Not Consolidated) 67 9,205 - 9,272

Tax Liabilities 104 - (1) 103 External Non Tax Liabilities 2,539 13 11 2,563 Total External Liabilities 2,643 13 10 2,666

Inter-segment Liabilities 2 3 - 5

Acquisition of Property, Plant & Equipment, Intangible Assets, & Other Non-current Assets 8 8 1 17 Depreciation & Amortisation Expense 6 - - 6 Impairment of Leasehold Improvements (1) - - (1)Impairment of Intangible Assets - 9 - 9

The major products / services from which the above segments derive income are:

Life Insurance and Investment:

Asset Management:

Other:

Secondary Segment Information - Geographical

marketing and administration of a comprehensive range of life insurance andsuperannuation products.

Life Group

As at 30 June 2008

As at 30 June 2009

marketing and administration of unit trusts and provision of asset administration services to financial advisers and fellow Life Group subsidiaries.

the other segments comprise other operations, none of which constitutes a seperately reportable segment.

The Life Group conducted superannuation scheme management activities in the year ended 30 June 2008. The amount of assets related to these activities not consolidated is disclosed within the segmental information in this note. Arrangements existed to ensure these activities were managed independently from the Life Group's other activities.

The Life Group operates predominantly in the insurance industry within New Zealand. The Life Group has very limited exposure to risks associated with operating in different economic environments or political conditions. On this basis no geographical segment information is provided.

The Asset Management segment was discontinued from 1 July 2008 due to the sale of the segment entities to ASB Bank Limited, as disclosed in Note 2 Discontinued Operations.

42



38 Interest Rate Summary

Assets:New Zealand Government Stock 4.6% 6.7%Foreign Government Stock 3.3% 3.8%Corporate Bonds 4.1% 4.3%Medium Term Notes 6.6% 9.6%Mortgages 6.5% 8.5%Loans on Policies 8.0% 10.0%Annuity Investment 13.4% 13.4%

Liabilities:Borrowings 4.1% 8.7%

39 Fair Value of Financial Instruments not Carried at Fair Value

$ millions Carrying FairNote Amount Value

As at 30 June 2009

Cash & Cash Equivalents 15 629 629 Trade and Other Receivables 20 61 61

Borrowings 25 353 363 Deposited Reserves 23 39 39 Trade and Other Payables 26 117 117

As at 30 June 2008

Cash & Cash Equivalents 15 571 571 Trade and Other Receivables 20 70 70

Borrowings 25 407 466 Deposited Reserves 23 40 40 Trade and Other Payables 26 153 153

Life Group

Investment contracts which contain a discretionary participation feature have been valued as insurance contracts under NZ IFRS 4. Thesecontracts are investment account contracts where policyholder monies are accumulated in an account which earns interest at a crediting rate,the amount and timing of which is at the Life Group's discretion. The carrying amount of these contracts at 30 June 2009 is $116m (30 June2008 $134m). Due to the unknown nature of the out workings of such a discretion, the fair value of the discretionary participation featurecannot be reliably measured.

Information about maturity of interest bearing financial assets and liabilities is disclosed elsewhere in these financial statements (refer to Notes14, 25 and 47).

The fair value of financial assets and liabilities that are not carried at fair value on the Balance Sheet are:

The weighted average yields at balance date on significant interest bearing financial assets and liabilities not disclosed elsewhere in thesefinancial statements are:

43


$ millionsAs at 2009 2008

40 Asset Quality

Impaired Assets


Past Due Assets


Credit Quality of Financial Assets that are not Past Due or Impaired


SecuritiesThe Life Group holds Securities issued by counterparties with the following S&P credit ratings :

Ratings 2009 2008 2009 2008

AAA 68 84 606 450 AA+ 1 2 - 18 AA 18 24 66 48 AA- 11 21 69 97 A+ 13 7 107 50 A 1 - - 5 Equity Securities 176 401 31 305 Managed Funds 402 397 105 166 Other Securities - - 35 38

690 936 1,019 1,177

Derivative Financial Instruments

Amounts Due from Reinsurers

The S&P credit ratings for the Life Group's major reinsurers are :

General Reinsurance Life Australia Limited AAAAssicurazioni Generali S.p.A. AA-RGA Reinsurance Company AA-Swiss Re Life and Health (Australia) Limited A+Munich Reinsurance Company of Australasia Limited AA-

The counterparty for the majority of the Life Group's Derivative Financial Instruments is ASB Bank Limited, except for the foreign currencyinterest rate swap where the counterparty is Deutsche Bank AG, which has an S&P credit rating of A+ (30 June 2008 AA).

Included in 'Other Securities' are Mortgages, which are fully secured against property, and Loans on Policies, which are fully secured againstcustomer life investment and insurance policies. Credit ratings are not provided for equity securities and managed funds because ratings areeither not available or are considered not an appropriate measure of asset quality.

Linked Non-Linked

Life Group

The Impaired Assets reported above include Agent Loans that are under management and overpaid commissions that are subject to external recovery or legal action. The amount of interest income accrued on Impaired Assets during the year was Nil (30 June 2008 Nil).

The Past Due Assets reported above include Residential Mortgages (reported in Securities) and Agent Loans (reported in Trade and OtherReceivables) where payments are one day or more overdue.

The Life Group's cash holdings are with ASB Bank Limited, which has a Standard and Poor's ("S&P") credit rating of AA (30 June 2008 AA),and Citigroup Inc. which has an S&P rating of A (30 June 2008 AA-).

Life Group

44


41 Provisions for Impairment Loss


Specific Provisions Balance at Beginning of Year 1 1 Additions 1 - Written Back to Income Statement (1) - Balance at End of Year 1 1

Total Impairment Provisions 1 1

42 Disaggregated Information

Investment Non-InvestmentLinked Linked

$ millions Policies Policies Total


Investments 946 1,499 2,445 Reinsured Life Insurance Contracts - 63 63 Other Assets 55 686 741 Liabilities other than Policy Liabilities 17 702 719 Policy Liabilities 984 530 1,514 Shareholders' Retained Earnings - 213 213

Premium Income - 502 502 Investment Income (82) (35) (117)Claims Expense - 318 318 Commission and Management Expenses 23 247 270 Investment Income allocated to Policyholders (82) (56) (138)Net Profit before Taxation 8 82 90 Net Profit after Taxation 12 73 85


Investments 1,106 1,652 2,758 Reinsured Life Insurance Contracts - 60 60 Other Assets 85 681 766 Liabilities other than Policy Liabilities 5 729 734 Policy Liabilities 1,186 746 1,932

Shareholders' Retained Earnings - 115 115

Premium Income - 448 448 Investment Income (59) 32 (27)Claims Expense - 299 299 Commission and Management Expenses 28 286 314 Investment Income allocated to Policyholders (59) (15) (74)Net Profit before Taxation 8 117 125 Net Profit after Taxation 12 91 103

NZ IFRS 4 requires disclosure of information between amounts relating to investment linked business and non-investment linked business for categories shown below. As there are no legal requirements to maintain separate life insurance funds, the Life Group does not maintain records that provide all the information required by NZ IFRS 4. Accordingly determination of the disaggregated information presented below requires the use of significant estimates but the basis of estimation has been consistent between years.

Life Group

The Specific Provision reported above is held against Agent Loans that are under management and overpaid commissions that are subject to legal action or external recovery.

Life Group

45


43 Risk Management Policies

Introduction

ASBGL and CMLA's objectives in managing risks arising from insurance business are:(i)(ii)(iii)(iv)(v)

- Mortality- Morbidity- Discontinuance rates- Expenses- Market rates on underlying assets

- Mortality- Morbidity- Market risk- Discontinuance- Expenses- Market rates on underlying assets

- Longevity - Market rates on underlying assets- Expenses

Concentrations of insurance risk arise due to:--

To use reinsurance as a component of insurance risk management strategy.

Non-participating life insurance contracts with fixed and guaranteed terms (Term Life and Disability, Major Medical)

Benefits paid on death, ill health or maturity that are fixed and guaranteed and not at the discretion of the issuer. Premiums may be guaranteed through the life of the contract, guaranteed for a specified term or variable at the insurer's discretion.

Benefits, defined by the insurance contract, are determined by the contract and are not directly affected by the performance of underlying assets or the performance of the contracts as a whole.

Key variables that affect the timing and uncertainty of future cash flows

Life insurance contracts with discretionary participating benefits (endowment and whole of life)

These policies include a clearly defined initial guaranteed sum assured which is payable on death. The guaranteed amount is a multiple of the amount that is increased throughout the duration of the policy by the addition of regular bonuses annually which, once added, are not removed. Regular bonuses are also added retrospectively.

Benefits arising from the discretionary participation feature are based on the performance of a specified pool of contracts or a specified type of contract.

Type of contract Detail of contract terms and conditions Nature of compensation for claims

To ensure risk appetite decisions are made within the context of corporate goals and governance structures.To ensure that an appropriate return on capital is made in return for accepting insurance risk.

To ensure that internal and external solvency and capital requirements are met.

The Life Group is exposed to risk through its financial assets, financial liabilities (investment contracts and borrowings), reinsurance assets and insurance liabilities. Risk management policies focus on ensuring cash flows from assets are sufficient to fund obligations arising from insurance and investment contracts. Key components of this relate to insurance risk, credit risk, market risk and liquidity risk.

ASBGL and CMLA's risk management strategy is set by the respective Board of Directors through the respective Board Audit and Risk Committees. The Board Audit and Risk Committees comprise members of the Board of Directors and are chaired by an independent member of the Boards. Implementation of risk management strategy is the responsibility of the Managing Director of SACL.

ASBGL and CMLA have management structures and information systems to manage individual risks, have separated risk initiation and monitoring tasks where feasible, and subject all material systems to regular internal audit. Periodic reviews of all risk management systems are undertaken by internal audit.

To ensure that strong internal controls embed underwriting to risk within the business.

Insurance Risk is measured using a sensitivity analysis to show the effects of the risks of mortality and morbidity on Life Insurance Contract Liabilities and profit (refer to Note 44).

ASBGL and CMLA

The Life Group's risk management strategy is set separately for ASBGL and its subsidiaries, CMLA, CFSIM, CFSI and its subsidiaries. CFSI, CFSIM and Colonial Holding Company Limited New Zealand Branch do not have material trading activities in the context of the Life Group.

Life annuity contracts These policies provide guaranteed regular payments to the life assured.

The amount of the payment is set at inception of the policy.

The following sections describe the risk management framework components:Insurance Risk

Terms and conditions of insurance contracts

The nature of terms of insurance contracts written is such that certain external variables can be identified on which related cash flows for claimpayments depend. The tables below provide an overview of these:

Variations in claim levels will affect reported profit and equity. The impact may be magnified if the variation leads to a change in actuarial assumptions which cannot be absorbed within the present value of planned margins for a group of related products.

Insurance risk may arise through the reassessment of the incidence of claims, the trend of future claims and the effect of unforeseen diseases or epidemics. In addition, in the case of morbidity, the time to recovery may be longer than assumed. Insurance risk is controlled by ensuring underwriting standards adequately identify potential risk, retaining the right to amend premiums on risk policies where appropriate and through the use of reinsurance. The experience of ASBGL's and CMLA's life insurance business is reviewed regularly.

Large sums assured on certain individuals. The largest exposures all relate to mortality. Geographic concentrations due to employee group schemes. ASBGL and CMLA participate in the CBA catastrophe cover reinsurance programme which provides cover of AUD $100m for single event claims in excess of AUD $10m.

46



Credit Risk

Reinsurance credit exposures are managed by reinsurance guidelines and limits set by the Board Audit and Risk Committee of ASBGL.

Liquidity Risk

Market Risk

Price Risk

Foreign Exchange Risk

Price risk is the risk that the value of a financial instrument will fluctuate as a result of changes in market prices, whether those changes are caused by factors specific to the individual instrument or its issuer or factors affecting all instruments of a specific type traded in the market.

This risk is controlled by ensuring a diverse range of investments, limits on counterparty exposure and restrictions on types of instruments.

Details of material foreign currency balances are shown in Note 45.

Foreign currency borrowings are 100% hedged (refer to Note 16).

Foreign exchange risk is the risk of loss to ASBGL and CMLA's earnings and value arising from adverse changes in foreign exchange rates.

Foreign currency exposures and risks arise as ASBGL and CMLA invest or borrow from offshore. Foreign currency denominated investments amounted to 63% (30 June 2008 66%) of total investments. The market value of these investments is therefore affected by movements in the New Zealand dollar relative to the currency in which the investment is denominated. ASBGL and CMLA also holds foreign currencies on short term deposit.

Foreign exchange contracts are used to hedge approximately 82% of currency risk (30 June 2008 73%). All equity fund investments denominated in foreign currency are 50% hedged (30 June 2008 50%). All fixed interest fund investments denominated in foreign currency are 100% hedged (30 June 2008 100%). All foreign currency hedging arrangements are economic hedges.

Credit risk is the potential risk for loss arising from failure of a counterparty to meet their contractual obligations.

Credit risk principally arises within ASBGL and CMLA from investments of shareholder funds or funds where the shareholder participates in investment returns in cash and fixed interest securities, and reinsurer payment obligations. Credit risk also arises from a mortgage portfolio, annuity investment, loans to agents, foreign exchange contracts, interest rate swaps, loans made using policies as security; and trade receivables (policyholder premium debtors, agent balances and sundry debtors).

The maximum credit risk associated with each class of recognised financial asset held by ASBGL and CMLA is the carrying value.

Market risk arises from the mismatch between assets and liabilities. ASBGL and CMLA are exposed to diverse financial instruments including interest rates, foreign currencies, equities, and derivative instruments. For each distinct category of liabilities, a separate portfolio of assets is maintained and investment mandates are set that are appropriate for each.

A significant proportion of assets are held for investment linked policies where market risk is transferred to the policyholder. ASBGL and CMLA earn fees on investment linked policies that are based on the amount of assets invested. They may receive lower fees should markets fall. Asset allocation for investment linked policies is decided by the policyholder.

Market risk arises on discretionary participation business as these contracts have investment guarantees. Risk is mitigated by using an appropriate bonus/credit rate policy and a suitable growth/income investment allocation.

Both ASBGL and CMLA have a comprehensive, clearly defined credit policy, that covers the approval and management of all credit risk.

Investment concentrations for shareholder funds are managed within established guidelines and limits set by the Asset and Liability Management Committee (ALCO) of ASBGL which also has responsibility for CMLA. Some criteria are referred to the Board Audit and Risk Committee of ASBGL for approval. Guidelines and limits are set for security credit ratings and aggregate exposure to any single counterparty or geographic region or counterparty (refer to Notes 46 and 48).

For Life Investment Linked Contracts the investments credit risk is appropriate for each particular product and the risk is borne by the Policyholder. There is no significant credit risk assumed by ASBGL or CMLA.

Market risk is the risk of an event in the financial markets that results in a fluctuation in earnings or a fluctuation in value.

Management of liquidity risk is designed to ensure that ASBGL and CMLA have the ability to meet financial obligations as they fall due.

ASBGL and CMLA monitor this risk primarily by forecasting future daily cash requirements. The risk is managed by holding a pool of readily tradable investment assets and deposits on call.

Market risk in the asset management business is the risk of an adverse movement in market prices that leads to a reduction in the amount of funds under management and a consequent reduction of fee income.

Market risk arises from returns obtained from investing the shareholder's funds held in ASBGL and CMLA. Appropriate investment mandates are set by ALCO for the investment of shareholder's funds. As at 30 June 2009, shareholder's funds in ASBGL and CMLA were invested 1% (30 June 2008 2%) in growth assets (shares and property) and 99% (30 June 2008 98%) in income assets (cash and fixed interest).

Market risk includes price, interest rate, foreign exchange and equity risk which are explained as follows:

ASBGL and CMLA's balance sheet risk is measured using sensitivity analysis by modelling the change in assets, liabilities, and profit from changes in interest rates and equity values (refer to Note 44).

47



Interest Rate Risk

Equity Risk

Internal Audit

CFSI & CFSIM

Credit Risk

Concentrations of Credit risk

Interest Rate Risk

Liquidity Risk

CHCThere are no material risk to CHC as all material transactions are inter-group.

The primary risks facing CFSI and CFSIM with respect to balance sheet financial instruments are credit and interest rate risk.

Since the acquisition of Sovereign Limited by Sovereign Group Limited on 4 December 1998, ASBGL and CMLA have been serviced by a centralised audit function which covers ASB Bank Limited, ASB Group (Life) Limited consolidated entities and CMLA. Sovereign Group Limited was amalgamated into ASB Group (Life) Limited on 29 June 2007.

Internal Audit provides independent opinions on the effectiveness of risk management systems, designed to assist ASBGL and CMLA in achieving their objectives by bringing a systematic and disciplined approach to improving the effectiveness of risk management systems, the framework of controls, and governance processes. Operational, compliance, financial and systems audits of all areas of the ASBGL and CMLA operations are undertaken based on an assessment of risk. The independent Internal Audit function is ultimately accountable to the Board of Directors of ASBGL through the Board Audit and Risk Committee.

The Board Audit and Risk Committees of ASBGL and CMLA meet on a regular basis to consider financial reporting, internal control and corporate governance issues. They review the interim and annual financial statements, the activities of the internal and external auditors and monitor the relationship between management and the external auditors.

Liquidity risk is the risk that CFSI and CFSIM will encounter difficulty raising liquid fund to meet commitments as they fall due. CFSI and CFSIM evaluate their liquidity requirements on an ongoing basis. In general sufficient cash flows are generated from operating activities to meet obligations arising from financial liabilities. In the event that a shortfall arises, CFSI and CFSIM may draw on funds from Related Parties.

CFSI and CFSIM has no off-balance sheet financial instruments, and do not use derivatives to manage risk positions.

Exposure to credit risk is managed by placing cash and cash equivalents with high credit quality financial institutions only. Other investments are also placed with high quality institutions. Counterparties are assessed for credit worthiness before credit is granted.

Fair value interest rate risk arises from shareholder funds invested in fixed interest investments. When fixed interest investments are held to match fixed interest style products selected by policyholders, the interest rate risk is borne by the policyholder.

Interest Rate Risk is measured by using sensitivity analysis to show the effects of the risks on assets, liabilities, and profit, (refer to Note 44).

Interest rate risk also arises on risk contracts where negative policy liabilities (arising from the implicit deferral of acquisition costs) are valued at current risk free interest rates.

To the extent CFSI and CFSIM have a receivable from another party, there is credit risk in the event of non-performance by that party. Financial instruments which potentially subject CFSI and CFSIM to credit risk, principally consist of cash and cash equivalents, advances to related entities, accounts receivable and other financial assets.

CFSI and CFSIM's maximum exposure to credit risk are equal to the carrying amount of these instruments.

CFSI and CFSIM have placed all cash and cash equivalents with ASB Bank Limited. All advances to related entities are with entities in the CBA gr

CFSI and CFSIM's only interest bearing asset is cash and cash equivalents which are all on call.

Interest rate risk is the risk of loss to ASBGL and CMLA arising from adverse changes in interest rates.

Fair value interest rate risk arises from the potential for a change in interest rates to cause a fluctuation in the fair value of financial instruments and the value of Life Insurance Contract Liabilities. Interest rate risk arises from the structure and characteristics of the assets, liabilities and equity, and in the mismatch in cash flows of assets and liabilities. The objective is to manage the interest rate risk to achieve stable and sustainable net profit.

Equity risk results from the repricing of equity investments held by ASBGL and CMLA. For investment linked contracts, this risk is borne by the policyholder. For assets that do not relate to investment linked contracts, the shareholder has exposure to equity risk either directly or due to performance guarantees.

This risk is controlled by ensuring a diverse range of equity investments.

Cash flow interest rate risk is the potential for a change in interest rates to change interest expense and interest income in the current reporting period and in future years. Cash flow interest rate risk arises on floating rate borrowings and ASBGL and CMLA's mortgage portfolio which is priced on a variable interest rate regime. Management regularly reviews the mortgage portfolio interest rates to ensure they are in line with market trends.

Interest rate risk is reduced by seeking to match the cash flows of assets and liabilities. This is achieved by changing the mix of assets and liabilities through buying and selling long term securities and through the use of interest rate swaps to mitigate the interest rate risk on ASBGL and CMLA's floating rate borrowing.

Overall strategic direction is provided by ALCO, which meets monthly.

48


44 Sensitivity Analysis

VariableExchange rate risk

Expense risk

Interest rate risk

Mortality rates

Morbidity rates

Discontinuance

Market risk

Effect on Assets

$ millions Gross of Reinsurance

Net of Reinsurance

Gross of Reinsurance

Net of Reinsurance

Gross of Reinsurance

Net of Reinsurance

As at 30 June 2009

Result of Change in Assumptions

Market RisksIncrease in Interest Rates of 1% (62) (52) (52) (8) (8) (10) (10)Decrease in Interest Rates of 1% 62 52 52 8 8 10 10 Equity Values Increase by 10% 51 51 51 - - - - Equity Values Decrease by 10% (51) (51) (51) - - - - Favourable Movement in Foreign Exchange Rates of 10% 58 58 58 - - - - Adverse Movement in Foreign Exchange Rates of 10% (58) (58) (58) - - - -

Insurance RisksIncrease in Expenses of 10% - - - - - - - Improvement of Mortality by 10% - 2 2 (2) (2) (2) (2)Worsening of Mortality by 10% - (2) (2) 2 2 2 2 Improvement of Morbidity by 10% - (4) (4) 4 4 4 4 Worsening of Morbidity by 10% - 4 4 (4) (4) (4) (4)Improvement in Discontinuance - (1) (1) 1 1 1 1 Rate of 20%Worsening of Discontinuance 1 1 (1) (1) (1) (1)Rate by 20%CFSI, CFSIM and CHC

A sensitivity analysis has not been disclosed for CFSI, CFSIM and CHC as the entities do not have material exposures to market risk.

ASBGL and CMLA conduct sensitivity analysis to quantify the exposure to risk of changes in the key underlying variables such as interest rate, exchange rate, mortality, morbidity and inflation. The valuations included in the reported results and the best estimate of future performance are calculated using certain assumptions about these variables. The movement in any key variable will impact performance and net assets and as such represents a risk.

ASBGL and CMLA do not fully hedge foreign currency denominated equity instruments. Adverse movements in foreign exchange rates relate to the New Zealand dollar will subsequently reduce the value of policyholder asset and liabilities.

An increase in the level or inflationary growth of expenses over assumed levels will decrease profit and shareholder's equity.

Depending on the profile of the investment portfolio, investment income will decrease as interest rates decrease. This may be offset to an extent by changes in the market value of fixed interest investments. The impact on profit and shareholder's equity depends on the relative profiles of assets and liabilities, to the extent that these are not matched.

Impact of movement in underlying variable

The cost of health-related claims depends on both the incidence of policyholders becoming ill and the duration which they remain ill. Higher than expected incidence and duration would be likely to increase claim costs, reducing profit and shareholders’ equity.

For insurance contracts, providing death benefits increased, greater mortality rates would lead to higher levels of claims occurring sooner than anticipated, increasing associated claims cost and therefore reducing profit and shareholder's equity. This is offset by increased annuitant mortality which would reduce expected future annuity payments and therefore reduce life insurance contract liabilities.

The impact of the discontinuance rate assumption depends on a range of factors including the type of contract, the surrender value basis (where applicable) and the duration in force. For example, an increase in discontinuance rates at earlier durations of life insurance contracts usually has a negative effect on performance and net assets. However, due to the interplay between the factors, there is not always an adverse outcome from an increase in discontinuance rates.

Effect on Liabilities Profit / (Loss) and Equity

ASBGL and CMLA

The table below illustrates how changes in key assumptions would impact the reported profit, liabilities and equity of ASBGL and CMLA. For Market risks, the effect of movements in interest rates or market values on the value of assets is also shown.

For investment contracts and life insurance contracts with discretionary participation features, liabilities depend on the value of underlying assets. Market risk may be entirely borne by policyholders. However, ASBGL and CMLA derive fee income based on the value of the underlying funds; hence revenues are always sensitive to changes in market value. For assets which are not contractually linked to policy liabilities, ASBGL and CMLA are exposed to market risk.

Equity

49


44 Sensitivity Analysis (continued)

Effect on Assets

$ millionsGross of

ReinsuranceNet of

ReinsuranceGross of

ReinsuranceNet of

ReinsuranceGross of

ReinsuranceNet of

ReinsuranceAs at 30 June 2008

Result of Change in Assumptions

Market RisksIncrease in Interest Rates of 1% (32) (18) (18) (12) (12) (14) (14)Decrease in Interest Rates of 1% 32 18 18 12 12 14 14 Equity Values Increase by 10% 75 75 75 - - - - Equity Values Decrease by 10% (75) (75) (75) - - - - Favourable Movement in Foreign Exchange Rates of 10% 80 77 77 3 3 3 3 Adverse Movement in Foreign Exchange Rates of 10% (80) (77) (77) (3) (3) (3) (3)

Insurance RisksIncrease in Expenses of 10% - - - - - - - Improvement of Mortality by 10% - 2 2 (2) (2) (2) (2)Worsening of Mortality by 10% - (2) (2) 2 2 2 2 Improvement of Morbidity by 10% - (6) (5) 6 5 6 5 Worsening of Morbidity by 10% - 6 5 (6) (5) (6) (5)Change in Discontinuance by 20% - - - - - - -

45 Material Foreign Currency Balances

$ millions USD AUD GBP YEN EURO OTHER

As at 30 June 2009

Financial AssetsCash and Cash Equivalents 7 11 3 7 6 1 Securities 381 207 160 312 325 46 Derivative Financial Instruments 25 53 - 6 21 2

Financial LiabilitiesBorrowings - (353) - - - - Derivative Financial Instruments - (4) - - (4) - Trade and Other Payables - (8) - - - -

Net Foreign Currency Assets / (Liabilities) 413 (94) 163 325 348 49

Derivative Financial Instruments Net Notional Principal 308 (656) 121 299 305 41

EquityASBGL and CMLA

The tables above are performed for reasonably possible movements in key assumptions with all other assumptions held constant, showing the impact on assets, liabilities, net profit and equity. The correlation of assumptions will have a significant effect in determining the ultimate claims liabilities, but to demonstrate the impact due to changes in assumptions, assumptions had to be changed on an individual basis. It should be noted that movements in these assumptions are non-linear.

Life Group

Profit / (Loss) and EquityEffect on Liabilities

50


45 Material Foreign Currency Balances (continued)

$ millions USD AUD GBP YEN EURO OTHER

As at 30 June 2008

Financial AssetsCash and Cash Equivalents 2 14 - 3 1 2 Securities 594 311 113 254 345 83 Derivative Financial Instruments 2 72 - - - -

Financial LiabilitiesBorrowings - (407) - - - - Derivative Financial Instruments - (16) (1) (1) (6) - Trade and Other Payables - (10) - - - -

Net Foreign Currency Assets / (Liabilities) 598 (36) 112 256 340 85

Derivative Financial Instruments Net Notional Principal 325 549 83 250 331 68

46 Concentrations of Credit Exposures by Geographic Region

$ millionsNew

ZealandNorth

AmericaAustralia Great

BritainAsia Europe Other Total

As at 30 June 2009Financial AssetsCash and Cash Equivalents 600 - - - 29 - - 629 Securities 284 222 532 125 195 330 21 1,709 Derivative Financial Instruments 54 - - - - 53 - 107 Trade and Other Receivables 51 - 7 - - 3 - 61

Total Credit Exposures by Geographic Region 989 222 539 125 224 386 21 2,506

As at 30 June 2008

Financial AssetsCash and Cash Equivalents 537 - - - 34 - - 571 Securities 436 367 267 124 181 705 33 2,113 Derivative Financial Instruments 3 - - - - 71 - 74 Trade and Other Receivables 62 - 6 - - 2 - 70

Total Credit Exposures by Geographic Region 1,038 367 273 124 215 778 33 2,828

Life Group

Life Group

Geographical segments are determined by identification of a particular economic environment that are subject to risk and returns that are different from those of segments operating in other economic environments.

51


47 Maturity Analysis of Financial Liabilities

$ millions

0 - 1 Month 1 - 3 Months 3 - 12 Months 1 - 5 Years Later than 5 Years

Total Carrying Value

As at 30 June 2009

Life Investment Contracts 689 3 16 121 312 1,141 984 Borrowings - 9 27 144 90 270 353 Derivative Financial Instruments 577 816 27 24 - 1,444 51 Deposited Reserves - - 2 7 30 39 39 Trade and Other Payables 98 7 - 1 - 106 117 Total Financial Liabilities 1,364 835 72 297 432 3,000 1,544

Simultaneous Inflows on Derivative Financial Instruments 592 837 - - - 1,429 51

As at 30 June 2008Audited

Life Investment Contracts 833 3 15 148 435 1,434 1,186 Borrowings - 19 58 308 270 655 407 Derivative Financial Instruments 627 754 - - - 1,381 25 Deposited Reserves - - 2 7 31 40 40 Trade and Other Payables 124 7 - - - 131 153

Total Financial Liabilities 1,584 783 75 463 736 3,641 1,811

Simultaneous Inflows on Derivative Financial Instruments 608 754 - - - 1,362 25

Life Group

The above analysis is based on contractual undiscounted cash flows. Where the counterparty has discretion in requesting payment, liabilities have been classified according to the earliest time period in which the Group may be required to pay. Cash flows on Derivative Financial Instruments are analysed on a gross basis, unless they are settled net. Refer to Note 43 for details of how the Life Group manages liquidity risk.

52


48 Concentration of Credit Exposures by Individual Counterparties

Balance Date Credit Exposure as at 2009 2008 2009 2008

Percentage of Shareholders' Equity

5 - 9 1 1 - 165 - 69 - 1 - - 70 - 74 1 - - -

2009 2008 2009 2008

Percentage of Shareholders' Equity

5 - 9 53 71 - 5265 - 69 - 562 - - 70 - 74 663 - - -

49 Events After Balance Date

The above tables have been compiled using gross exposures and do not include any guarantee arrangements.

There were no credit exposures to individual or connected counterparties greater than 10% of Commonwealth Bank of Australia's equity as at 30 June 2009 (30 June 2008 Nil).

Balance Date Credit Exposure as at

Only counterparties with balance date exposures exceeding 5% of Shareholders' Equity are disclosed. Government exposures are excluded. Equity securities and managed funds investing in equity securities have been excluded as the Life Group is only exposed to price risk on these instruments, not credit risk. Refer to Note 43 for details on how the Life Group manages price risk.

Percentages are calculated using the Life Group's Shareholder's Equity as at balance date.

There have been no material events after balance date.

Life GroupNumber of Banks Number of Non-banks

Life Group

Total Exposure to Banks ($ millions)Total Exposure to Non-banks

($ millions)

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