COMMONWEALTH BANK OF AUSTRALIA NEW ZEALAND …€¦ · Group") of Commonwealth Bank of Australia...

COMMONWEALTH BANK OF AUSTRALIA NEW ZEALAND OPERATIONS

GENERAL SHORT FORM DISCLOSURE STATEMENT

For the six months ended 31 December 2008

Commonwealth Bank of Australia NZ Operations

General Disclosure Statement

31 December 2008

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.

GENERAL DISCLOSURE STATEMENT

31 December 2008For the six months 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 - 77 Notes to the Financial Statements13 - 20 1 Statement of Accounting Policies

21 2 Interest Income21 3 Interest Expense21 4 Discontinued Activities

21 - 22 5 Other Income22 6 Operating Expense Disclosures22 7 Auditor's Remuneration22 8 Taxation22 9 Dividends23 10 Cash and Call Deposits with the Central Bank23 11 Due from Other Banks23 12 Money Market Advances23 13 Securities

24 - 26 14 Derivative Financial Instruments27 15 Advances to Customers

27 - 37 16 Credit Risk Management and Asset Quality37 - 38 17 Investments in Associates and Subsidiaries

38 18 Other Assets38 - 39 19 Property, Plant and Equipment

40 20 Intangible Assets41 21 Deferred Taxation Asset / (Liability)41 22 Due to Other Banks42 23 Money Market Deposits42 24 Deposits from Customers42 25 Other Liabilities

43 - 44 26 Subordinated Debt45 27 Head Office Account and Contributed Capital45 28 Asset Revaluation Reserves45 29 Available for Sale Reserves45 30 Cash Flow Hedge Reserves46 31 Foreign Currency Translation Reserves46 32 Retained Earnings46 33 Minority Interests47 3447 35 Reconciliation of Cash and Cash Equivalents to the Balance Sheet47 36 Imputation and Policyholder Credit Accounts

48 - 49 37 Related Party Transactions and Balances50 38 Directors and Key Management Personnel

50 - 51 39 Credit and Capital Commitments, and Contingent Liabilities51 40 Leasing and Other Commitments52 41 Fair Value of Financial Instruments

53 - 61 42 Capital Adequacy61 43

62 44 Financial Reporting by Segments63 - 77 45 Risk Management Policies

77 46 Events after the Balance Sheet Date78 - 89 Auditor's Review 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

This document comprises the General Disclosure Statement for the Commonwealth Bank of Australia New Zealand Banking Group (the "BankingGroup") of Commonwealth Bank of Australia New Zealand Operations (the "CBA NZ Operations") and Commonwealth Bank of Australia NewZealand Branch (the "Registered Bank") as at 31 December 2008. The business of the Registered Bank comprises all banking business transactedin New Zealand through the New Zealand branch. This information is published in accordance with the Registered Bank Disclosure Statement (Fulland 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 requestbeing made to the above address. A copy of the Financial Statements may also be obtained from the Commonwealth Bank of Australia'swebsite (www.commbank.com.au) in the Shareholder Centre.

The Commonwealth Bank of Australia (the "CBA") operates as a public company under the Corporations Act in Australia. It has share capitaland 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 disclosedapplies to the Banking Group.

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

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 Australiaof 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 holdassets of a lesser value. This requirement has the potential to impact on the management of the liquidity of the New Zealand operations of theCommonwealth 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 conductcommercial and savings bank functions. These functions were gradually expanded under continued Government ownership until September1991 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") (whichincludes a bank) becomes unable to meet its obligations or suspends payment, the assets of the ADI in Australia are to be available to meetthe 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 theadministration of the Scheme in respect of that ADI; (c) third, in payment of the ADI's deposit liabilities in Australia (other than liabilitiescovered 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 relatingto the winding up of companies, but subject to Section 13A(3) of the Banking Act 1959, the debts of an ADI to the Australian PrudentialRegulation Authority ("APRA") in respect of APRA’s costs (including costs in the nature of remuneration and expenses) of being in control ofthe 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 otherunsecured debts.

Section 86 of the Reserve Bank Act 1959 of the Commonwealth of Australia provides that notwithstanding anything contained in any lawrelating 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 byan ADI shall, in the winding up, have priority over all other debts other than debts due to the Commonwealth of Australia. The CommonwealthBank of Australia is an ADI.

1

4.0 Guarantee Arrangements

4.1

4.2

(i)

(ii)

(iii)

(iv) "Not Complex"

General

The Government has indicated that the guarantee arrangements may require refinement or adjustment in light of market developments, and hasindicated 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

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 dematerialisedform; 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 programs.

Term funding liabilities

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-takinginstitutions. Commonwealth Bank of Australia is an eligible Authorised Deposit-taking Institution (“ADI”) under the terms of the guaranteearrangements. 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 withADI'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, orcovered financial product, that is kept under an agreement between the account holder and the ADI requiring the ADI to pay the account holder ondemand, 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 becovered financial products.

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

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 theADI). Access to the Guarantee Scheme is voluntary. Separate arrangements apply for deposit balances totalling up to and including AUD 1 millionper customer per institution . Such deposits are guaranteed by the Australian Government under the Financial Claims Scheme and this guarantee isfree.

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

The guarantee of deposits up to and including AUD 1 million applies without charge. The Government has stated the guarantee will operate for aperiod 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 websitewww.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 fundingliabilities. 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 prescribethe criteria which must be satisfied before a certificate can be issued, and the application process and fees applicable. The ADI must provide certainstatements 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 documentssetting out the terms and conditions of the guarantee arrangements, are available at the Treasury website www.treasury.gov.au and atwww.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 maturitiesup to 60 months.

2

4.0 Guarantee Arrangements (continued)

Fitch Ratings

Moody's Investors Service, Inc.

Standard & Poor's (Australia) Pty Limited

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

4.3

Long Term Ratings (and Any Qualifications)Rating Agency

As at the date of the signing of this General Disclosure Statement, the following ratings were assigned to the Commonwealth ofAustralia'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 theCrown guarantees retail deposits of participating financial institutions from 12 October 2008 until 12 October 2010. The RegisteredBank does not have a guarantee under the Scheme. However, ASB Bank Limited, a member of the Banking Group with its ownseparate banking licence is covered by the Scheme. Information on the Scheme is available on the Treasury websitewww.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 Nil

5.2 Directors of the Commonwealth Bank of Australia

EXECUTIVE DIRECTOR

Name 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

Starlight Foundation, Allens Arthur Robinson Limited, Clayton Utz, National Australia DayCouncil, National Library of Australia

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, New Zealand External Directorships Florey Neuroscience Institutes

Cricket, International Cricket Council, Asia Society AustralAsia Centre, Howard Capital Coast District Health Board, Florey Institute Foundation, Financial Services New Zealand Venture Investment Fund, Volunteer Corps, Asia SocietyNew Zealand Meat Industry Taskforce

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 Brambles Limited, Cobham plc External Directorships AMP Foundation

AUDIT COMMITTEE

All members in the Audit Committee are independent directors.

Address for Directors and the New Zealand Chief Executive Officer

Mr C.J.S. Pink replaced Mr G.H. Burrett as Responsible Person authorised by the Directors to sign the General Disclosure Statement in accordance with section 62 of the Reserve Bank of New Zealand Act with effect from 1 January 2009.

There have been no changes to Directors since the 30 September 2008 General Short Form Disclosure Statement was signed.

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

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) McRobieHead of Group Finance and Risk ManagementAuckland, 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)

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.

There have been no dealings with Directors of any entities within the Banking Group or of Commonwealth Bank of Australia or parties related tothese 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 thoseentities, and are required to abstain from any vote on those proceedings. Entities within the Banking Group comply with all requirements of theCompanies 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 andaccordingly are to be regarded as having an interest in any contract or proposed contract that may be made between the Commonwealth Bankof Australia and any of those companies.

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) Act1994 (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;

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 thatinsurance 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 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 relatingto that insurance business, plus the equity retained by the entity to meet the solvency or financial soundness needs of the insurancebusiness;

the amounts measured in relation to parts (a) and (b) shall be summed and compared to the total consolidated assets of the BankingGroup. 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 suchproducts or assets shall be considered part of the insurance business.

5

6.0

6.6

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)

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)

AA

There have been no changes to the conditions of registration since the signing of the previous disclosure statement (for the period ending 30September 2008).

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

Aa1

AA

Rating Agency Current Long Term Rating

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 ofits 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 affiliateof 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 theAustralian 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 aredefined 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 Bankof Australia and those subsidiaries of the Commonwealth Bank of Australia (except those which conduct life assurance business) whosebusiness is required to be reported in financial statements for the group's New Zealand business prepared in accordance with Section 9(2) ofthe 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 financialposition, 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 ofAustralia's long term debt:

The Moody's rating was raised from Aa3 to Aa1 on 4 May 2007. The Standard and Poor's rating was raised from AA- to AA on 21 February2007. The Fitch rating was assigned as AA and has remained unchanged since 1999.

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

6

Historical Summary of Aggregated Financial Statements

PreviousNZ IFRS NZ IFRS NZ IFRS NZ IFRS NZ IFRS NZ GAAP

Unaudited Audited Audited Audited Audited AuditedFor the period ended 31-Dec-08 30-Jun-08 30-Jun-07 30-Jun-06 30-Jun-05 30-Jun-04$ millions 6 months 12 months 12 months 12 months 12 months 12 months

INCOME STATEMENT

Interest Income 2,836 5,147 4,142 3,425 2,829 2,173

Interest Expense 2,334 4,128 3,273 2,656 2,092 1,527

Net Interest Earnings 502 1,019 869 769 737 646

Other Income 214 331 491 374 297 274

Total Operating Income 716 1,350 1,360 1,143 1,034 920

Impairment Losses on Advances 85 47 17 19 16 21

Total Operating Income after Impairment Losses 631 1,303 1,343 1,124 1,018 899

Total Operating Expenses 340 595 539 504 478 468

Net Profit before Taxation 291 708 804 620 540 431

Taxation 78 218 239 196 173 146

Net Profit after Taxation 213 490 565 424 367 285

Of which Impaired Asset Expense / (Recovery) 51 26 8 (1) (1) (1)

DIVIDENDS and REPATRIATIONS PAID

Minority Interests 18 34 31 30 18 10

Ordinary Dividends - 510 530 689 - -

Redeemable Preference Dividends 29 59 30 160 - -

Distribution of Prior Period Profit - 8 5 7 4 5

Total Dividends and Repatriations Paid 47 611 596 886 22 15


$ millions Unaudited Audited Audited Audited Audited AuditedAs at 31-Dec-08 30-Jun-08 30-Jun-07 30-Jun-06 30-Jun-05 30-Jun-04

BALANCE SHEET

Total Assets 72,647 66,323 58,532 48,511 41,684 35,365

Of which Impaired Assets 178 30 10 5 32 26

Total Liabilities 69,447 62,913 55,796 46,624 39,559 33,938

Total Shareholder's Equity 3,200 3,410 2,736 1,887 2,125 1,427

Banking Group

Banking Group

8

Income Statement

Unaudited Unaudited Audited Unaudited Unaudited AuditedFor the period ended 31-Dec-08 31-Dec-07 30-Jun-08 31-Dec-08 31-Dec-07 30-Jun-08$ millions Note 6 months 6 months 12 months 6 months 6 months 12 months

Interest Income 2 2,836 2,451 5,147 444 422 881

Interest Expense 3 2,334 1,957 4,128 420 407 849

Net Interest Earnings 502 494 1,019 24 15 32

Other Income 5 214 191 331 40 11 15

Total Operating Income 716 685 1,350 64 26 47

Impairment Losses on Advances 16 (b) 85 5 47 18 - 7

Total Operating Income after Impairment Losses 631 680 1,303 46 26 40

Total Operating Expenses 6 340 299 595 4 3 6

Salaries and Other Staff Expenses 200 177 351 3 2 5

Building Occupancy and Equipment Expenses 53 49 101 - - -

Information Technology Expenses 33 26 54 - - -

Other Expenses 54 47 89 1 1 1


Taxation 8 78 122 218 13 8 12


Attributable to: Parent Company Shareholders 195 243 456 29 15 22 Minority Interests 33 18 16 34 - - -


Banking Group Registered Bank

These statements are to be read in conjunction with the notes on pages 13 to 77 and the Auditor's Review Report on pages 78 and 79.

Interest Rate Swaps which are transacted as economic hedges of interest rate risk, but which do not qualify for hedge accounting under NZ IAS 39Financial Instruments: Recognition and Measurement , are accounted for at fair value. Changes in the fair value of these swaps are reflected in theIncome Statement immediately when they occur. This can create an accounting inconsistency, as changes in the fair value of the swaps cannot be offsetagainst changes in the fair value or cash flows attributable to the underlying transaction.

Other Income for the Banking Group for the period ended 31 December 2008 included a loss of $105m before tax from such swaps (31 December 2007$16m loss, 30 June 2008 $82m loss).

9

Statement of Recognised Income and Expense


Items Recognised Directly in Equity:

Movement in Asset Revaluation Reserves 28 - - 2 - - -

Net Change in Available for Sale Reserves 29 (6) - 19 - - -

Net Change in Cash Flow Hedge Reserves 30 (571) 17 (185) 11 2 2

Net Change in Investment Hedge 31 (171) (43) (78) - - -

Currency Translation Differences 31 172 43 78 - - -

32- - 1 - - -

Net (Expense) / Income Recognised Directly in Equity (576) 17 (163) 11 2 2


(363) 276 327 40 17 24

Attributable to:Parent Company Shareholders (381) 260 293 40 17 24

Minority Interests 33 18 16 34 - - -

(363) 276 327 40 17 24



Total Recognised Income and Expense

Total Recognised Income and Expense

Transfer from Asset Revaluation Reserves to Retained Earnings

10

Balance Sheet

$ millions Unaudited Unaudited Audited Unaudited Unaudited AuditedAs at Note 31-Dec-08 31-Dec-07 30-Jun-08 31-Dec-08 31-Dec-07 30-Jun-08

ASSETSCash and Call Deposits with the Central Bank 10 1,291 1,412 1,155 79 8 59Due from Other Banks 11 1,007 674 637 3,902 3,841 3,738Money Market Advances 12 287 3,351 1,223 - - - Securities 13 6,487 4,672 5,402 390 307 440Derivative Assets 14 4,224 989 1,249 601 74 268Advances to Customers 15 58,278 50,036 55,773 5,962 5,700 6,530Current Taxation Asset 93 - 74 - 8 8Other Assets 18 353 302 320 77 79 81Property, Plant and Equipment 19 155 151 159 - - - Intangible Assets 20 384 324 331 - - - Deferred Taxation Asset 21 88 - - 7 2 4

Total Assets 72,647 61,911 66,323 11,018 10,019 11,128

Total Interest Earning and Discount Bearing Assets 67,134 60,082 64,070 10,254 9,848 10,708

Financed by:

LIABILITIESDue to Other Banks 22 7,639 6,755 7,800 5,283 4,191 5,341Money Market Deposits 23 20,936 18,079 20,040 - - - Derivative Liabilities 14 4,187 1,340 1,193 17 535 450Deposits from Customers 24 30,185 26,487 27,821 293 1,015 851Current Taxation Liability - 17 - 3 - - Other Liabilities 25 601 490 735 44 44 78Deferred Taxation Liability 21 - 321 195 - - - Subordinated Debt 26 5,899 4,674 5,129 4,866 3,969 4,136


SHAREHOLDER'S EQUITYHead Office Contribution 27 462 262 262 462 262 262Contributed Capital - Ordinary Shareholder 27 704 534 704 - - - Asset Revaluation Reserves 28 29 27 29 - - - Available for Sale Reserves 29 13 - 19 - - - Cash Flow Hedge Reserves 30 (565) 208 6 - (11) (11)Foreign Currency Translation Reserve 31 1 - - - - - Retained Earnings 32 735 896 569 50 14 21

Ordinary Shareholder's Equity 1,379 1,927 1,589 512 265 272

Contributed Capital - Redeemable Preference Shareholder 27 1,271 1,271 1,271 - - - Total Shareholder's Equity Attributed to Parent Company Shareholders 2,650 3,198 2,860 512 265 272

Minority InterestControlled Entities 33 550 550 550 - - -

Total Shareholder's Equity 3,200 3,748 3,410 512 265 272

Total Liabilities and Shareholder's Equity 72,647 61,911 66,323 11,018 10,019 11,128

Total Interest and Discount Bearing Liabilities 62,209 52,023 53,263 10,442 9,175 10,328



11

Cash Flow Statement


CASH FLOWS FROM OPERATING ACTIVITIESInterest Received 2,879 2,372 5,064 455 410 865Other Income Received 745 339 831 3 42 33Dividends Received - 1 3 - - - Interest Paid (2,238) (1,925) (4,000) (454) (427) (811)Operating Expenses (333) (273) (528) - (5) (7)Net Taxation Paid (86) (74) (196) (1) (6) (11)Receipts from Related Parties for Tax Related Items 4 10 22 - - -

971 450 1,196 3 14 69

Changes in Operating Assets and LiabilitiesNet Decrease / (Increase) in Money Market Advances 953 (1,068) (1,813) - - - Net Decrease / (Increase) in Due from Other Banks (Term) 34 436 423 (118) (13) (44)Net (Increase) / Decrease in Advances to Customers (2,541) (2,340) (5,202) 548 (233) (1,028)Net (Increase) / Decrease in Trading Securities (1,450) (1,261) (1,837) 49 22 (110)Net Increase / (Decrease) in Customer Deposits 2,363 1,989 3,322 (558) 182 17Net (Decrease) / Increase in Money Market Deposits (592) 750 1,786 - - - Net (Decrease) / Increase in Due to Other Banks (Term) (169) (241) 761 (63) (10) 1,140

Cash Flows from Operating Assets and Liabilities (1,402) (1,735) (2,560) (142) (52) (25)

Net Cash Flows from Operating Activities 34 (431) (1,285) (1,364) (139) (38) 44

CASH FLOWS FROM INVESTING ACTIVITIES

Cash was applied to:Acquisition of Subsidiaries Net of Cash Acquired 46 - - - - - Net (Decrease) / Increase in Other Securities (864) 560 569 - - - Purchase of Property, Plant and Equipment 21 11 25 - - - Purchase of Intangible Assets 15 18 33 - - -

(782) 589 627 - - -

Net Cash Flows from Investing Activities 782 (589) (627) - - -

CASH FLOWS FROM FINANCING ACTIVITIESCash was provided from:

Head Office Contribution 200 8 8 200 8 8Issue of Ordinary Share Capital - - 170 - - - Issue of Redeemable Preference Shares - 780 780 - - - Issue of Subordinated Debt - 370 531 - 120 120

200 1,158 1,489 200 128 128Cash was applied to:

Dividends Paid 29 28 540 - - - Dividends Paid to Minority Interest 18 16 34 - - Repatriation of Profit - 8 8 - 8 8Redemption of Subordinated Debt 1 780 780 - - 120

48 832 1,362 - 8 128

Net Cash Flows from Financing Activities 152 326 127 200 120 -

SUMMARY OF MOVEMENTS IN CASH FLOWS

Net Increase / (Decrease) in Cash and Cash Equivalents 503 (1,548) (1,864) 61 82 44Add: Cash and Cash Equivalents at Beginning of Period 560 2,424 2,424 68 24 24Cash and Cash Equivalents at End of Period 35 1,063 876 560 129 106 68


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

Registered BankBanking Group

12

Notes to the Financial Statements For the period ended 31 December 2008

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 Entities

The following new standards and amendments to standards relevant to the Banking Group are not yet effective and have not yet been applied inpreparing the financial statements. Adoption of these standards will not have any impact on the Banking Group's reported profit or financial position.

NZ IAS 1 Presentation of Financial Statements (revised) will apply to the Banking Group from 1 July 2009 and will result in changes to thedisclosure of changes in Equity.

The reporting entity is Commonwealth Bank of Australia New Zealand Branch (the "Registered Bank"), which holds the banking licence for thepurposes of this disclosure statement. The reporting group (the "Banking Group") is the aggregated results of: Commonwealth Bank of Australia NewZealand Branch, ASB Holdings Limited, ASB Funding Limited, ASB Bank Limited and its subsidiaries, 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 TreasuryServices NZ Limited. The basis of aggregation is an addition of the Banking Group entities' individual financial statements. All transactions andbalances 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 New Zealand equivalents to International Financial Reporting Standards ("NZ IFRS") and other applicable Financial ReportingStandards, 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 issueby the Directors on 16 March 2009.

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

NZ IFRS 3 Business Combinations (revised) will apply to the Banking Group from 1 July 2009 and will result in additional disclosures in the eventof a business combination.

Estimates and assumptions are continually evaluated, and are based on historical experience and other factors, including expectations of future eventsthat are believed to be reasonable under the circumstances. The Banking Group considers that the valuation of financial instruments, the Provision forImpairment 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 impairmentprovision 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 thefinancial statements, apart from those involving estimation, are the designation of financial assets and financial liabilities as at fair value through profitor loss.

NZ IFRS 8 Operating Segments will apply to the Banking Group from 1 July 2009 and will affect the financial and descriptive informationdisclosed about the Banking Group's reportable segments.

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

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

The measurement base adopted is that of historical cost as modified by the fair value measurement of Available for Sale Financial Assets, FinancialInstruments 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 thefinancial 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 theBanking Group has the power, directly or indirectly, to govern the financial and operating policies of entities so as to obtain benefits from theiractivities. The financial statements of subsidiaries are included in the Banking Group's financial statements from the date on which control istransferred 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 madeup to balance date, using the purchase method. All intra group balances and transactions have been eliminated in preparing the consolidatedfinancial statements.

A Glossary of Terms included within the Statement of Accounting Policies is set out on page 20.

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

There have been no material changes to accounting policies in the period ended 31 December 2008. All policies have been applied on a basisconsistent with that used during the financial year ended 30 June 2008.

13


1 Statement of Accounting Policies (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

FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

Assets in this category are measured at fair value and are described on the following page.

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

The Banking Group's primary reporting format is business segments (refer to Note 44). Segments reported are in line with the organisationalstructure 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 systematicbasis is more representative of the time pattern of the benefit received. All other expenses are recognised in the Income Statement on anaccrual basis.

Fees and direct costs relating to loan origination, financing or restructuring and to loan commitments are deferred and amortised to InterestIncome over the life of the loan using the effective interest method. Lending fees not directly related to the origination of a loan are recognisedover 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 reliablymeasured. 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 tofair value.

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

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

For financial instruments measured at amortised cost, the effective interest method is used to measure the Interest Income or Expenserecognised 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 tomaturity basis.

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

The Banking Group offers an extensive range of financial instruments. Financial instruments are transacted on a commercial basis to derive aninterest yield / cost with terms and conditions having due regard to the nature of the transaction and the risks involved. All financial instrumentsare accounted for on a settlement date basis. They are classified in one of the following categories at initial recognition: Financial Assets at FairValue through Profit or Loss, Available for Sale Financial Assets, Loans and Receivables, Held to Maturity, Financial Liabilities at Fair Valuethrough 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 andgains 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 andunrealised 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 ofexchange ruling as at balance date. Income Statements are translated at the weighted average rates for the year. All resulting exchangedifferences are recognised in the Foreign Currency Translation Reserve ("FCTR") as a separate component of equity. Gains or lossesaccumulated in the FCTR are transferred to the Income Statement upon partial or full disposal of the overseas subsidiary.

14



Due from Other Banks

Money Market Advances

Securities

Derivative Assets


Advances to Customers

Other Assets

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

Subsequent changes in the fair value of securities which are either held for trading or designated as at Fair Value through Profit or Loss, arerecognised in Other Income and may include interest income depending on the instrument. Coupon securities exclude interest income, whereasall 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 otherassets and liabilities accounted for and evaluated on a fair value basis.

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

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

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

Due from Other Banks is defined by the nature of the counterparty and includes loans, nostro balances and settlement account balances duefrom other banks. Amounts Due from Other Banks booked in ASB Bank Limited are measured at Fair Value. Fair value is calculated on thesame 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 toaccount at face value.

Other Assets include the accrual of interest coupons and fees receivable. For derivatives any accrued interest is recognised and measured aspart 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 securitiesdesignated as at Fair Value through Profit or Loss. The fair value of Securities is based on quoted market prices, where available, or calculatedusing 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 moredetails 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 hasclassified certain equity investments (in entities over which the Banking Group has neither control nor significant influence) as Available for SaleFinancial Assets.

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

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

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

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

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.

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 BankingGroup are not managed on a fair value basis and are recorded at amortised cost.

15



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

Fair Value Hedge Accounting

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

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 anadjustment 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, thedifference between the carrying value of the hedged item at that point and the value at which it would have been carried had the hedge neverexisted (the "unamortised fair value adjustment") is maintained as part of the carrying value of the hedged item and amortised to the IncomeStatement based on a recalculated effective interest rate.

The Banking Group recognises derivatives in the Balance Sheet at their fair value. Fair values are obtained from market yields and discountedcash 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 are classified as at Fair Value through Profit or Loss. Thisincludes derivatives transacted as part of the trading activity of ASB Bank Limited's Treasury and Financial Markets Division, as well asderivatives transacted as economic hedges but not qualifying for hedge accounting. Changes in fair value are reflected in the Income Statementimmediately when they occur.

The Banking Group discontinues hedge accounting when it is determined that a hedge has ceased to be highly effective; when the derivativeexpires, or is sold, terminated, or exercised; when the hedged item matures or is sold or repaid; when a forecast transaction is no longer deemedhighly 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 CashFlow Hedge Reserves. The ineffective portion of a fair valuation gain or loss is recognised immediately in the Income Statement. When thetransaction or item that the derivative is hedging (including cash flows from transactions that were only forecast when the derivative hedge waseffected) affects income or expense then the associated gain or loss on the hedging derivative is simultaneously transferred from Cash FlowHedge Reserves to the corresponding income or expense line item in the Income Statement.

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 forecasttransaction 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 immediatelytransferred to Other Income.

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

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

Derivatives, including foreign exchange contracts, forward rate agreements, futures, options, interest rate swaps and currency swaps, are usedas part of the Banking Group's financial market activities and to hedge certain assets and liabilities.

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

OTHER FINANCIAL LIABILITIES

Other Liabilities include the accrual of interest coupons and fees payable. For derivatives any accrued interest is recognised and measured aspart 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 changesin fair value related to the hedged risk.

Deposits from Customers cover all forms of funding, apart from those classified as at Fair Value through Profit or Loss and include transactionaland savings accounts, term deposits and credit balances on cards.

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

16



(i) Leasing

(j) Repurchase and Reverse Repurchase Agreements

(k) Offsetting Financial Instruments

(l) Derecognition of Financial Assets

(m) Asset Quality

IMPAIRED ASSETS

(a)

(b)(c)

OTHER DEFINITIONS

(a)(b)

PROVISION FOR IMPAIRMENT

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

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

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 nototherwise 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.

Loans and Receivables are reviewed at each balance date to determine whether there is any objective evidence of impairment. Individuallysignificant 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 andthe recoverable amount. The recoverable amounts of Advances measured at amortised cost are calculated as the present value of the expectedfuture cash flows discounted at the instrument’s original effective interest rate for fixed rate Advances and the current effective interest rate forvariable rate Advances. Short term balances are not discounted.

A Past Due Asset is any credit exposure where a counterparty has failed to make a payment when contractually due, and which is not anImpaired Asset. A 90-day Past Due Asset is any past due asset which has not been operated by the counterparty within its key terms for at least90 days and which is not an Impaired Asset.

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

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

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

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


Financial assets are derecognised either when sold, or when the rights to receive cash flows from the financial assets have expired or have beentransferred, or when the Banking Group has transferred substantially all the risks and rewards of ownership. In transactions where substantiallyall the risk and rewards are neither retained nor transferred, the Banking Group derecognises assets when control is no longer retained, or whencontrol 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 of the risks and rewards of ownership are classified as Finance Leases. Whenassets are held subject to a Finance Lease, the present value of the lease payments is recognised as a receivable and is reported withinAdvances to Customers. The difference between the gross receivable and the present value of the receivable is treated as unearned financeincome. Lease Income is recognised over the lease term so as to produce a constant periodic rate of return on the net investment in the FinanceLease.

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 torepurchase is recorded as a Money Market Deposit. The difference between the sale and repurchase price represents Interest Expense and isrecognised in the Income Statement over the term of the repurchase agreement. Securities held under reverse repurchase agreements arerecorded as Money Market Advances. The difference between the purchase and sale price represents Interest Income and is recognised in theIncome 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 legallyenforceable 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 for which:the original terms have been changed to grant the counterparty a concession that would not otherwise have been available, due to thecounterparty's difficulties in complying with the original terms; 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.

17



(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

(p) Intangible Assets

GOODWILL

COMPUTER SOFTWARE

(q) Taxation

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

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

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

Assets are reviewed for impairment at least annually and whenever events or changes in circumstances indicate that the carrying amount may notbe recoverable. An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than itsestimated recoverable amount. For revalued assets the write-down is treated in the same way as adjustments arising from revaluations describedabove. For other assets the impairment loss is recognised as an expense. The recoverable amount is the higher of the asset's fair value lesscosts to sell and value in use.

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

The Banking Group generally expenses Computer Software costs in the period incurred. However, some costs associated with developingidentifiable and unique software products controlled by the Banking Group, including employee costs and an appropriate portion of relevantoverheads are capitalised and treated as Intangible Assets. These assets are amortised using the straight line method over their useful lives (notexceeding three years).

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

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

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

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

Goodwill, representing the excess of the purchase consideration over the fair value of the identifiable net assets of a controlled entity at the date ofgaining 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 beimpaired. If any such indication exists, the asset's recoverable amount is estimated, and an impairment loss is recognised under OperatingExpenses in the Income Statement for the difference between the carrying amount and the recoverable amount. Impairment losses on goodwillare not reversed. For the purposes of impairment testing, Goodwill is allocated to cash-generating units or groups of units. A cash-generating unitis the smallest identifiable group of assets that generate independent cash flows. Goodwill is allocated by the Banking Group to cash generatingunits or groups of units based on how Goodwill is monitored by management. Gains and losses on the disposal of an entity include the carryingvalue of goodwill relating to the entity sold.

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 usefullives on a straight line basis. The range of useful lives of the major assets are:

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

Land and Buildings are revalued annually to reflect current market value. The valuations are carried out by independent registered valuers in Mayof each year. The valuers are all Associate Members of the New Zealand Institute of Valuers and the major valuers are Jones Lang LaSalleAdvisory 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 AssetRevaluation Reserve of any individual asset the loss is recognised in the Income Statement, and any subsequent revaluation gains are writtenback through the Income Statement to the extent of past losses written off.

18



(r) Provisions

(s) Contingent Liabilities and Credit Commitments

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

(u) Cash Flow Statement

FAIR VALUE ESTIMATES

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

COMPARATIVE DATA

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

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

For Non-interest Bearing Debt, call and variable rate Deposits, the carrying amounts in the Balance Sheet are a reasonable estimate of their fairvalue. For other term Deposits and fixed rate Issued Paper, fair value is estimated using discounted cash flow models based on the maturity of theinstruments. The discount rates applied in this calculation are based on current market interest rates for similar instruments with similar maturityprofiles. 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 RelatedItems and Commitments, no secondary market exists and it is therefore not practical to obtain fair values for those instruments. These items havetherefore been excluded from fair value calculations.

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

Subordinated Debt

Off Balance Sheet Items

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

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 nothave direct or indirect control of the trusts and funds. Commissions and fees earned in respect of the activities are included in Total OperatingIncome.

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

Cash and Call Deposits with the Central Bank



Cash and Cash Equivalents comprises Cash, Cash at Bank, Cash in Transit and Call Deposits Due from / to Other Banks, all of which are usedin the day-to-day cash management of the Banking Group.

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

These assets are short term in nature and the related carrying value is equivalent to their fair value.

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

Securitised assets are derecognised when the right to receive cash flows have expired or the Banking Group has transferred substantially allthe 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 thannot) that a future taxable profit will be available against which the asset can be utilised. Deferred Taxation Assets are reduced to the extent thatit 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 pastevents; 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 ofthe obligation.

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

The Banking Group issues commitments to extend credit, letters of credit, guarantees and other credit facilities. These financial instrumentsattract fees in line with market prices for similar arrangements. They are not sold or traded. The items generally do not involve cash paymentsother 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.

19



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

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 changesin 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 theamount by which the changes in the fair value of the hedging derivative differ from changes in the fair value of the hedged item. Such gainsand 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 orcash 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 portionof 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 bythe Banking Group as at Fair Value through Profit or Loss. Assets and Liabilities in this category are measured at fair value. Gains or lossesarising from changes in fair value are recognised in Other Income.

The amount at which the financial asset or financial liability is measured at initial recognition minus principal repayments, plus or minus thecumulative amortisation using the effective interest method of any difference between that initial amount and the maturity amount, and minusany 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 orchanges in interest rates or exchange rates. They are recognised on acquisition and subsequently at fair value. Changes in the value ofAvailable for Sale Financial Assets are reported in an Available for Sale Reserve, until the assets are sold or otherwise disposed of, or untilthey 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 ahighly 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 ofallocating the Interest Income or Interest Expense over the relevant period. The effective interest rate is the rate that exactly discountsestimated future cash payments or receipts through the expected life of the financial instrument or, when appropriate, a shorter period to thenet carrying amount of the financial asset or financial liability. When calculating the effective interest rate, the Banking Group estimates cashflows considering all contractual terms of the financial instrument, but does not consider future credit losses. The calculation includes all feespaid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiumsor discounts. The interest income or expense is allocated through the life of the instrument and is measured for inclusion in the IncomeStatement by applying the effective interest rate to its amortised cost.

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 adesignated hedged item.

Non-derivative financial assets with fixed or determinable payments and a fixed maturity that the Banking Group has a positive intention andability 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 costusing the effective interest method.

20


Unaudited Unaudited Audited Unaudited Unaudited AuditedFor the period ended 31-Dec-08 31-Dec-07 30-Jun-08 31-Dec-08 31-Dec-07 30-Jun-08$ millions 6 months 6 months 12 months 6 months 6 months 12 months

2 Interest Income

Central Bank Deposits 65 76 138 - - - Advances at Fair Value through Profit or Loss 55 151 327 - - - Securities 175 162 334 14 13 28Due from Other Banks at Amortised Cost - - - 153 164 315Advances to Customers 2,541 2,062 4,344 277 245 538Other - - 4 - - - Total Interest Income 2,836 2,451 5,147 444 422 881

3 Interest Expense

Deposits at Fair Value through Profit or LossCertificates of Deposit 84 112 207 - - - Issued Paper 269 138 304 - - - Term Deposits 20 86 16 - - - Deposits Bearing Interest (on Demand and Short Term) 45 19 112 - - -

418 355 639 - - -

Derivative Instruments not in Hedge Relationships 259 283 662 36 71 127

Deposits at Amortised CostCertificates of Deposit 18 - - - - - Due to Other Banks 332 273 665 201 178 389Issued Paper 81 84 133 - - - Term Deposits from Customers 659 504 1,099 19 9 28Other Interest Bearing Deposits from Customers 385 291 610 61 58 112

1,475 1,152 2,507 281 245 529

Subordinated Debt 182 167 319 103 91 193Other - - 1 - - -

Total Interest Expense 2,334 1,957 4,128 420 407 849

4 Discontinued Activities

5 Other Income

Services and Commission IncomeLending and Credit Facility Related Fee Income 131 94 185 15 9 19Other Fees Received 106 81 164 - - - Total Services and Commission Income 237 175 349 15 9 19

Services and Commission ExpenseLending and Credit Facility Related Fee Expense (22) (21) (41) - - - Other Fees Paid (7) (3) (6) - - - Total Services and Commission Expense (29) (24) (47) - - -

Net Foreign Exchange Earnings and Commissions 26 23 46 - - -

Net Foreign Exchange Translation Gain / (Loss) on Financial Instruments not measured at Fair Value 434 (66) (1,156) 434 (66) (1,156)

Net Fair Value Gain / (Loss) from:Trading Securities 63 (5) 3 - - - Derivatives Transacted as Hedges but not Qualifying for (105) (16) (82) 23 (2) (2)

Hedge AccountingOther Derivatives 2,868 340 2,021 (434) 66 1,156Financial Assets Designated as at Fair Value through Profit or Loss 655 41 193 - - - Financial Liabilities Designated as at Fair Value through Profit or Loss (3,950) (289) (1,022) - - - Available for Sale Financial Assets - - 45 - - - Total Net Fair Value (Loss) / Gain (469) 71 1,158 (411) 64 1,154

Ineffective Portion of Hedges:Fair Value Hedge Ineffectiveness:

Gain on Hedged Items 210 112 126 324 119 123Loss on Hedging Instruments (211) (116) (134) (322) (119) (123)

Cash Flow Hedge Ineffectiveness 16 15 (11) - 4 (2)Total Ineffective Portion of Hedges 15 11 (19) 2 4 (2)

There were no discontinued activities during the period ended 31 December 2008 (31 December 2007 Nil, 30 June 2007 Nil).


Interest Income on Advances to Customers for the period ended 31 December 2008 included interest earned on Impaired Assets of $5m for theBanking Group and Nil for the Registered Bank (31 December 2007 Nil for both the Banking Group and Registered Bank, 30 June 2008 $3m for theBanking Group and Nil for the Registered Bank).

21


Unaudited Unaudited Audited Unaudited Unaudited AuditedFor the period ended 31-Dec-08 31-Dec-07 30-Jun-08 31-Dec-08 31-Dec-07 30-Jun-08$ millions 6 months 6 months 12 months 6 months 6 months 12 months

5 Other Income (continued)

Other Operating IncomeNet Loss on Disposal of Property, Plant and Equipment - - (1) - - - Dividends Received from Associates and Subsidiaries - - 1 - - - Other Dividends Received - 1 2 - - - Other - - (2) - - - Total Other Operating Income - 1 - - - - Total Other Income 214 191 331 40 11 15

6 Operating Expense Disclosures

DepreciationBuildings 5 4 9 - - - Furniture and Fittings 3 3 6 - - - Computer and Office Equipment and Operating Software 9 10 20 - - - Total Depreciation 17 17 35 - - -

Operating Lease Rentals 23 21 42 - - -

Amortisation of Intangible Assets 11 5 13 - - -

7 Auditor's Remuneration

8 Taxation

Current Taxation 112 156 284 16 6 12Deferred Taxation (refer to Note 21) (34) (34) (66) (3) 2 -

Total Income Tax Charged to the Income Statement 78 122 218 13 8 12


Tax at the Domestic Rate of 30% (33% in Comparative Periods) 87 126 234 13 8 12

Tax Effect of Income not Subject to Taxation (24) (8) (61) - - - Tax Effect of Expenses not Deductible for Taxation Purposes 14 8 30 - - - Tax Effect of Imputation Credit adjustments (1) (5) (10) - - - Tax Effect of Prior Period Adjustments 2 - 23 - - - Tax Effect of Change to Domestic Rate - 1 2 - - -

Taxation Expense 78 122 218 13 8 12

Weighted Average Applicable Tax Rate 26.8% 32.0% 30.8% 30.0% 33.0% 33.0%

9 Dividends

Ordinary Dividends - - 510 - - - Redeemable Preference Dividends 29 28 59 - - - Total Dividends 29 28 569 - - -

For the period ended 31 December 2008, no dividends on Ordinary Shares were paid by ASB Holdings Limited (31 December 2007 Nil, 30 June 2008$510m paid by ASB Holdings Limited, being $0.98 per share).

For the period ended 31 December 2008 dividends on Redeemable Preference Shares were $29m (4.09 cents per share) paid by CBA Funding (NZ)Limited (31 December 2007 $28m paid by CBA Funding (NZ) Limited (4.11 cents per share), 30 June 2008 $59m paid by CBA Funding (NZ) Limited(8.36 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 taxeffect 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 taxrate as follows:

Audit fees of $1,116,000 for the Banking Group and $60,000 for the Registered Bank were paid to PricewaterhouseCoopers during the period ended31 December 2008 (31 December 2007 $695,000 and $72,000 30 June 2008 $1,391,000 and $145,000).

Fees for Other Services of $421,000 for the Banking Group and Nil for the Registered Bank were paid to PricewaterhouseCoopers during the periodended 31 December 2008 (31 December 2007 328,000 and Nil, 30 June 2008 643,000 and 9,000).

PricewaterhouseCoopers is the appointed auditor of the Banking Group.

22


$ millions Unaudited Unaudited Audited Unaudited Unaudited AuditedAs at 31-Dec-08 31-Dec-07 30-Jun-08 31-Dec-08 31-Dec-07 30-Jun-08

10 Cash and Call Deposits with the Central Bank

Cash and Cash at Bank 105 95 66 79 8 59Cash in Transit 80 66 (1) - - - Cash and Call Deposits with the Central Bank 1,106 1,251 1,090 - - - Total Cash and Call Deposits with the Central Bank 1,291 1,412 1,155 79 8 59

11 Due from Other Banks

Call 418 62 43 55 98 9Term 589 612 594 3,847 3,743 3,729Total Due from Other Banks 1,007 674 637 3,902 3,841 3,738

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

Call 418 62 43 - - - Term 427 567 557 - - - Total at Fair Value through Profit or Loss 845 629 600 - - -

(b) At Amortised CostCall - - - 55 98 9Term 162 45 37 3,847 3,743 3,729Total at Amortised Cost 162 45 37 3,902 3,841 3,738

Other Government Securities accepted 272 - 247 - - - Other Securities accepted - 128 433 - - -

No securities have been repledged as at 31 December 2008 (31 December 2007 Nil, 30 June 2008 Nil).

12 Money Market Advances

Call 201 82 51 - - - Term 86 3,269 1,172 - - - Total Money Market Advances 287 3,351 1,223 - - -

Fair Value of collateral accepted for Money Market Advances, which the Banking Group is permitted to sell or repledge:

New Zealand Government Securities accepted - 265 - - - -

13 Securities

Trading SecuritiesLocal Authority Securities 109 96 84 - - - New Zealand Government Securities 357 39 64 - - - Treasury Bills 1,682 354 738 390 307 440Bank Bills 2,010 1,729 1,800 - - - Other 953 808 921 - - -

5,111 3,026 3,607 390 307 440Other Securities Designated as at Fair Value through Profit or LossDebt Securities 1,345 1,624 1,741 - - - Equity Securities - 22 18 - - -

1,345 1,646 1,759 - - - Total Securities at Fair Value through Profit or Loss 6,456 4,672 5,366 390 307 440

Securities Designated as Available for SaleEquity Securities 31 - 36 - - -

6,487 4,672 5,402 390 307 440

Fair Value of Securities pledged under repurchase agreements or other arrangements:New Zealand Government Securities - 25 10 - - -

The Banking Group has not reclassified any financial assets as measured at amortised cost rather than fair value during the period ended 31 December 2008 (31 December 2007 Nil, 30 June 2008 Nil).

The Banking Group has not reclassified any financial assets as measured at fair value rather than amortised cost during the period ended 31 December 2008 (31 December 2007 Nil, 30 June 2008 Nil).

For the period ended 31 December 2008 no loss was attributable to changes in credit risk for Money Market Advances designated at Fair Valuethrough Profit or Loss (31 December 2007 Nil, 30 June 2008 $2m). The maximum exposure to credit risk for Advances at Fair Value through Profit orLoss is represented by their carrying values.

Total Securities


The Banking Group has not reclassified any financial assets as measured at amortised cost rather than fair value during the period ended 31December 2008 (31 December 2007 Nil, 30 June 2008 Nil).

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 financial assets as measured at amortised cost rather than fair value during the period ended 31 December 2008 (31 December 2007 Nil, 30 June 2008 Nil).

No securities have been repledged as at 31 December 2008 (31 December 2007 Nil, 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 31 December 2008 $500m included in Due from Other Banks was advanced as collateral to offset Derivative Liabilities (31 December 2007 Nil, 30 June 2008 Nil).

23


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 31 December 2008Unaudited

AT FAIR VALUE THROUGH PROFIT OR LOSS

Exchange Rate ContractsForward Contracts 11,202 714 (396) - - - Swaps 13,236 494 (373) 2,345 33 - Options 7 1 (1) - - - Total Exchange Rate Contracts 24,445 1,209 (770) 2,345 33 -

Interest Rate ContractsForward Contracts 6,352 7 (8) - - - Swaps 57,843 1,945 (2,031) 33 - (7)Futures 11,298 18 (15) - - - Options 1,750 9 (9) - - - Total Interest Rate Contracts 77,243 1,979 (2,063) 33 - (7)

Commodity ContractsForward Contracts 6 3 (3) - - -

Total at Fair Value through Profit or Loss 101,694 3,191 (2,836) 2,378 33 (7)

DESIGNATED AS CASH FLOW HEDGES

Exchange Rate ContractsSwaps 3,639 143 (21) 1,847 38 (9)

Interest Rate ContractsSwaps 29,408 238 (1,225) 269 - -

Total Designated as Cash Flow Hedges 33,047 381 (1,246) 2,116 38 (9)

DESIGNATED AS FAIR VALUE HEDGES

Exchange Rate ContractsSwaps 1,210 115 - 1,210 115 -

Interest Rate ContractsSwaps 6,003 537 (105) 2,198 415 (1)

Total Designated as Fair Value Hedges 7,213 652 (105) 3,408 530 (1)Total Recognised Derivative Assets / (Liabilities) 141,954 4,224 (4,187) 7,902 601 (17)

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 cashflows under the hedged transactions occur.

The Banking Group hedges 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 anexplanation of the Banking Group's accounting policies for Derivatives.

ASB Bank Limited has entered into Credit Support Annexes ("CSA") in respect of certain derivative counterparties. These CSA’s compel ASB BankLimited or the Counterparty to collateralise the market value of outstanding derivative transactions. As at 31 December 2008 ASB Bank Limited hadplaced $500m of cash collateral against Derivative Liabilities and taken $25m of collateral against Derivative Assets.

The Banking Group hedges the forecasted interest cash flows from floating rate deposits and the roll-over of short term fixed rate fundingarrangements using Cross Currency and Interest Rate Swaps. As at 31 December 2008 there were no transactions where cash flow hedge accountingceased during the period as a result of highly probable cash flows no longer expected to occur (31 December 2007 Nil, 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. TheBanking Group has also hedged certain fixed rate funding arrangements, included in Money Market Deposits and Subordinated Debt, using InterestRate and Cross Currency Swaps.

Fair Value Fair ValueBanking Group Registered Bank

24


14 Derivative Financial Instruments (continued)




Exchange Rate ContractsForward Contracts 12,093 116 (212) - - - Swaps 9,850 117 (483) 2,030 - (300)Options 166 2 (2) - - - Total Exchange Rate Contracts 22,109 235 (697) 2,030 - (300)

Interest Rate ContractsForward Contracts 5,788 - (1) - - - Swaps 41,433 334 (283) - - - Futures 6,221 1 (1) - - - Options 1,529 5 (5) - - - Total Interest Rate Contracts 54,971 340 (290) - - -

Equity ContractsForward ContractsSwapsOptions 47 2 - - - -

Commodity ContractsForward Contracts 2 - - - - -

Total at Fair Value through Profit or Loss 77,129 577 (987) 2,030 - (300)


Exchange Rate ContractsSwaps 3,823 14 (42) 1,558 - (22)

Interest Rate ContractsSwaps 27,000 314 (94) 255 - (4)

Total Designated as Cash Flow Hedges 30,823 328 (136) 1,813 - (26)


Exchange Rate ContractsSwaps 902 - (209) 902 - (209)

Interest Rate ContractsSwaps 3,841 84 (8) 1,660 74 -

Total Designated as Fair Value Hedges 4,743 84 (217) 2,562 74 (209)

Total Recognised Derivative Assets / (Liabilities) 112,695 989 (1,340) 6,405 74 (535)

Banking Group Registered Bank Fair Value Fair Value

25


14 Derivative Financial Instruments (continued)


As at 30 June 2008Audited


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 ContractsForward ContractsSwapsOptions 47 9 (4) - - -

Commodity ContractsForward Contracts 3 - - - - -

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


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)


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 58,372 50,147 55,891 5,976 5,706 6,542Fair Value Hedge Adjustments 84 (14) 4 7 - 1Provisions for Impairment (178) (97) (122) (21) (6) (13)Total Advances to Customers 58,278 50,036 55,773 5,962 5,700 6,530

Advances to Customers include Finance Lease Receivables as follows:

Gross Investment in Finance Lease ReceivablesNo later than 1 year 51 53 115 10 9 8Later than 1 year and no later than 5 years 169 164 170 23 9 12Later than 5 years 403 377 363 2 2 2

623 594 648 35 20 22Less Unearned Future Finance Income 87 168 160 7 3 4Net Investment in Finance Leases 536 426 488 28 17 18

The Net Investment in Finance Leases may be analysed as follows :No later than 1 year 36 28 91 8 6 6Later than 1 year and no later than 5 years 123 84 89 19 9 10Later than 5 years 377 314 308 1 2 2Net Investment in Finance Leases 536 426 488 28 17 18

16 Credit Risk Management and Asset Quality

The respective Board Risk Committees of ASB Bank Limited and CBA operate under charters by which they oversee credit management policies andpractices. The Committees ensure that credit policies and portfolio standards designed to achieve portfolio outcomes consistent with the risk / returnexpectations of ASB Bank Limited and the Registered Bank respectively, are in place and maintained. In addition, the Committees review and adjustwhere appropriate the risk appetite of ASB Bank Limited and the Registered Bank. The Committees also approve large individually significantprovisions 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 ofportfolio management objectives to create a diversified portfolio avoiding significantly large concentrations of economically related credit riskexposures.


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 BankingGroup assuming contingent liabilities, taking equity participations, participating in financial market transactions and assuming underwritingcommitments. 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 lossthe 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 thisarrangement the lessee bears the risk associated with changes in the fair value of the aircraft.

Credit Risk Management

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

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 andlevel of any collateral held.

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. Thisincludes consideration of the probability of default ("PD"), the exposure at the time of default ("EAD") and the loss given default ("LGD") that wouldlikely 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 flowsinto the future to meet the terms of all its credit contracts with the Banking Group.

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

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 andcapacity to repay that are good to exceptional. Retailfacilities with low expected loss.

Moderate EL Pool 2 CRR 4 - 6 Corporate facilities demonstrating financial condition andcapacity 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 specialattention (not necessarily contractually past due). Retailfacilities 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

1.

2.

Asset Quality

ASB Bank Limited and the Registered Bank have policies and procedures in place setting out the circumstance where acceptable and appropriatecollateral 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 Reserve Bank of New Zealand ("RBNZ") as follows:

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. Theoverall 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 AssetReview unit.

Corporate

Corporate exposures comprise commercial exposures, including bank and government exposures. A Credit Risk Rating ("CRR") is recorded againstevery 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.

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

Retail

CRRs fall into two categories:

ASB Bank Limited and the Registered Bank assess the integrity and ability of debtors or counterparties to meet their contracted financial obligations forrepayment. Collateral security in the form of real property or a security interest in personal property is generally taken for business credit except formajor government, bank and corporate counterparties of strong financial standing. Longer term consumer finance (e.g. housing loans), is generallysecured 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 gradebased 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 toproduce 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 protector improve the Banking Group’s position by maximising recovery prospects or to facilitate rehabilitation.

28



>

>

>

>

>

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

ASB Bank Limited or the Registered Bank become aware that the client will not be able to meet future repayments or service alternativeacceptable 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 caseeven 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 assessedprovisions are made against individually significant financial assets when there is objective evidence that either ASB Bank Limited or the RegisteredBank will not be able to collect all amounts due. The amount of the impairment/loss is the difference between the carrying amount and the recoverableamount, 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 usingappropriate effective interest rates.

Corporate portfolios are assessed for objective evidence that the financial asset or portfolio of assets is impaired. Impaired assets in the Corporatesegment include those facilities where an individually assessed provision for impairment has been raised, the facility is maintained on a cash basis, aloss 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 aloan portfolio with similar credit risk characteristics contain probable losses at the balance sheet date that will be individually identified in the future, orwhere insufficient data exists to reliably determine whether such losses exist. The estimated probable losses are based upon historical patterns oflosses. 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 relatedlosses. 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 alsoassists management in assessing the requirements of NZ IAS 39 relating to impairment and provisioning of financial assets.

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.

29


Registered Bank

$ millionsResidential

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


(a) Credit Quality Information for Advances to Customers


Gross Advances to Customers by Credit QualityNeither Past Due Nor Impaired 33,597 3,683 17,614 54,894 5,945Past Due 2,607 331 362 3,300 - Impaired 15 8 155 178 31Total Gross Advances to Customers by Credit Quality 36,219 4,022 18,131 58,372 5,976

(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 33,354 1,724 10,900 45,978 5,122Medium Expected Loss 243 1,945 6,367 8,555 788High Expected Loss - 14 347 361 35Total Advances Neither Past Due Nor Impaired 33,597 3,683 17,614 54,894 5,945

Aging Analysis of Past Due AssetsLess than 30 days 1,955 234 249 2,438 - 30 to 59 days 315 43 29 387 - 60 to 89 days 139 19 8 166 - Over 90 days 198 35 76 309 - Total Past Due Assets 2,607 331 362 3,300 -

90-day Past Due AssetsBalance at Beginning of Period 92 22 30 144 - Additions 114 15 52 181 - Less: Amounts Written Off 8 2 6 16 - Balance at End of Period 198 35 76 309 -

Impaired AssetsBalance at Beginning of Period 8 1 21 30 - Additions 8 7 148 163 41Less: Amounts Written Off 1 - 14 15 10Gross Advances Individually Determined to be Impaired 15 8 155 178 31Less: Individually Assessed Provisions 8 3 47 58 8Net Advances Individually Determined to be Impaired 7 5 108 120 23

Other Assets Under AdministrationBalance at Beginning of Period - 1 - 1 - Additions 14 5 9 28 - Balance at End of Period 14 6 9 29 -

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 :

As at 31 December 2008 neither the Banking Group nor the Registered Bank had any restructured assets or financial assets, real estate assets orother assets acquired through enforcement of security (31 December 2007 Nil, 30 June 2008 Nil).

There were no Undrawn balances on lending commitments to counterparties within the 90-day Past Due Asset category as at 31 December 2008 (31 December 2007 Nil, 30 June 2008 Nil) for both Banking Group and Registered Bank.

Undrawn balances on lending commitments to counterparties within the Impaired Asset category were $5m for Banking Group and Nil for Registered Bank as at 31 December 2008 (31 December 2007 Nil and Nil, 30 June 2008 $1m and Nil).

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

Undrawn balances on lending commitments to counterparties within the Other Assets Under Administration category were $1m for Banking Group and Nil for Registered Bank as at 31 December 2008 (31 December 2007 Nil for both, 30 June 2008 $1m for Banking Group and Nil for Registered Bank).

Interest forgone is the amount of income that would have been recorded if interest accruals on specific loans had not been set to Nil and is estimatedbased on market rates. Under NZ IFRS interest on impaired on assets is no longer reserved and therefore no interest has been forgone.

30


Registered Bank


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


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


Gross Advances to Customers by Credit QualityNeither Past Due Nor Impaired 32,246 3,481 12,005 47,732 5,694Past Due 1,747 301 355 2,403 12Impaired 2 1 9 12 - Total Gross Advances to Customers by Credit Quality 33,995 3,783 12,369 50,147 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 is comprised entirely of Corporate customers.


Low Exposure Loss 32,245 2,333 7,891 42,469 4,795Medium Exposure Loss 1 1,145 4,040 5,186 899High Exposure Loss - 3 74 77 - Total Advances Neither Past Due Nor Impaired 32,246 3,481 12,005 47,732 5,694

Aging Analysis of Past Due AssetsLess than 30 days 1,434 236 290 1,960 - 30 to 59 days 202 36 42 280 1260 to 89 days 65 12 14 91 - Over 90 days 46 17 9 72 - Total Past Due Assets 1,747 301 355 2,403 12

90-day Past Due AssetsBalance at Beginning of Period 47 19 20 86 - Additions / (Deletions) 2 - (10) (8) - Less: Amounts Written Off 3 2 1 6 - Balance at End of Period 46 17 9 72 -

Impaired AssetsBalance at Beginning of Period 1 2 7 10 - Additions 1 - 2 3 - Less: Amounts Written Off - 1 - 1 - Gross Advances Individually Determined to be Impaired 2 1 9 12 - - Less: Individually Assessed Provisions - - 8 8 - Net Advances Individually Determined to be Impaired 2 1 1 4 - -

Other Assets Under AdministrationBalance at Beginning of Period 7 2 - 9 - Additions / (Deletions) 1 (1) - - - Balance at End of Period 8 1 - 9 - -

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 :

31


Registered Bank


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


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


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 is comprised entirely of Corporate customers.


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 Period 47 19 20 86 - Additions 55 5 13 73 - Less: Amounts Written Off 10 2 3 15 - Balance at End of Period 92 22 30 144 -

Impaired AssetsBalance at Beginning of Period 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 Period 7 2 - 9 - Deletions (7) (1) - (8) - Balance at End of Period - 1 - 1 -

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:

32

Notes to the Financial Statements

Registered Bank

$ millionsResidential Mortgages Other Retail Corporate Total Corporate


(b) Provisions for Impairment Loss


Collective ProvisionBalance at Beginning of Period 16 30 54 100 13Charged to Income Statement 11 2 7 20 - Balance at End of Period 27 32 61 120 13

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

New Provisions 4 3 49 56 18Amounts Recovered - (1) (4) (5) -

Write Offs Against Individually Assessed Provisions (1) - (14) (15) (10)Balance at End of Period 8 3 47 58 8Total Provisions for Impairment Loss 35 35 108 178 21

Movement in Collective Provision 11 2 7 20 - Movement in Individually Assessed Provisions 4 2 45 51 18Bad Debts Written Off 8 2 6 16 - Bad Debts Recovered (2) - - (2) -

21 6 58 85 18


Collective ProvisionBalance at Beginning of Period 5 38 47 90 6Charged to Income Statement - 3 (4) (1) - Balance at End of Period 5 41 43 89 6


New Provisions - - 3 3 - Amounts Recovered (1) - - (1) -

Write Offs Against Individually Assessed Provisions - (1) - (1) - Balance at End of Period - - 8 8 - Total Provisions for Impairment Loss 5 41 51 97 6

Movement in Collective Provision - 3 (4) (1) - Movement in Individually Assessed Provisions (1) - 3 2 - Bad Debts Written Off 3 2 1 6 - Bad Debts Recovered (2) - - (2) -

- 5 - 5 -

Impairment Losses Charged to the Income Statement

Total Impairment Losses Charged to the Income Statement

For the period ended 31 December 2008

Banking Group

Impairment Losses Charged to the Income Statement

Total Impairment Losses Charged to the Income Statement

33

Notes to the Financial Statements

Registered Bank

$ millionsResidential Mortgages Other Retail Corporate Total Corporate


(b) Provisions for Impairment Loss (continued)


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


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

Write Offs Against Individually Assessed Provisions - (1) (10) (11) - Balance at End of Period 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) - Total Impairment Losses Charged to the Income Statement 23 (6) 30 47 7

For the period ended 31 December 2008

Banking Group

34



(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


Agricultural, Forestry and Fishing 6,845 108 885 7,838 578 - 305 883Government and Public Authorities 464 2,080 517 3,061 84 390 275 749Financial, Investments and Insurance 15,479 9,429 1,941 26,849 6,523 601 682 7,806Utilities 721 15 786 1,522 659 - 779 1,438Transport and Storage 1,530 53 220 1,803 852 - 186 1,038Housing (1) 30,034 - 4,166 34,200 - - - - Construction 391 9 85 485 - - - - Personal 682 - 1,133 1,815 - - - - Other Commercial and Industrial 3,585 149 1,452 5,186 1,247 - 837 2,084

59,731 11,843 11,185 82,759 9,943 991 3,064 13,998

Auckland 38,306 158 7,269 45,733 8,254 - 1,814 10,068Rest of New Zealand 21,263 1,562 3,913 26,738 1,527 390 1,250 3,167Overseas 162 549 3 714 162 - - 162Uncategorised Exposures - 9,574 - 9,574 - 601 - 601

59,731 11,843 11,185 82,759 9,943 991 3,064 13,998


Agricultural, Forestry and Fishing 4,463 742 599 5,804 266 - 8 274Government and Public Authorities 217 1,554 239 2,010 115 307 158 580Financial, Investments and Insurance 13,197 6,143 1,935 21,275 6,822 74 871 7,767Utilities 594 159 627 1,380 583 - 612 1,195Transport and Storage 1,176 156 347 1,679 685 - 306 991Housing (1) 28,277 - 4,090 32,367 - - - - Construction 308 65 119 492 - - - - Personal 612 5 1,296 1,913 8 - - 8Other Commercial and Industrial 2,649 817 1,405 4,871 1,070 - 597 1,667

51,493 9,641 10,657 71,791 9,549 381 2,552 12,482

Auckland 33,083 1,466 7,037 41,586 8,600 - 1,573 10,173Rest of New Zealand 18,014 2,355 3,380 23,749 904 307 979 2,190Overseas 396 51 2 449 45 - - 45Uncategorised Exposures - 5,769 238 6,007 - 74 - 74

51,493 9,641 10,657 71,791 9,549 381 2,552 12,482

Registered Bank

Total Credit Exposures by Geographic Region

Concentration by Industry

Concentration by Geographic Region

Total Credit Exposures by Industry

(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.

The following table presents the maximum exposure to credit risk of financial assets and other credit exposures, before taking account of any collateralheld 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 Exposuresinclude irrevocable Lending Commitments, Guarantees, Standby Letters of Credit and other off balance sheet Credit Commitments. The maximumexposure to credit risk for Guarantees and Standby Letters of Credit is the maximum amount that the Banking Group would have to pay if the facilitieswere called upon. For irrevocable Lending Commitments and other Credit Commitments, the maximum exposure to credit risk is the full amount of thecommitted facilities.


Within the Geographic analysis, Uncategorised Exposures include Due from Other Banks, Derivative Assets and Securities. The nature of theseassets makes them inappropriate to categorise geographically.




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

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

Banking Group

35



(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


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 34,365 907 6,992 42,264 9,077 - 1,524 10,601Rest of New Zealand 22,203 824 3,973 27,000 1,215 440 873 2,528Overseas 397 848 49 1,294 35 - - 35Uncategorised Exposures - 5,895 - 5,895 - 268 - 268

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






36



(d) Concentrations of Credit Exposures to Individual Counterparties

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 CompanyBayswater and Bond Limited 75 FinanceBond 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 FinanceWaterloo & Victoria Limited 75 Finance

Other Controlled EntitiesASB Cash Fund - Portfolio Investment EntityASB Term Fund - Portfolio Investment EntityMedallion NZ Master Trust - Residential Mortgage Backed SecuritiesMedallion NZ Series Trust 2008-1U - 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.

There are no credit exposures to individual counterparties greater than 10% of Commonwealth Bank of Australia's 31 December 2008 equity (31 December 2007 Nil, 30 June 2008 Nil).

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

All Subsidiaries were incorporated in New Zealand except for Bayswater and Bond Limited, Bond Investments UK Limited and Waterloo & VictoriaLimited, all of which were incorporated in the Cayman Islands.

37


17 Controlled Entities and Associates (continued)

Changes in composition of the Banking Group

$ millionsUnaudited Unaudited Audited Unaudited Unaudited Audited

As at 31-Dec-08 31-Dec-07 30-Jun-08 31-Dec-08 31-Dec-07 30-Jun-08

18 Other Assets

Interest Receivable 254 242 246 71 78 80Other Current Assets 99 60 74 6 1 1Total Other Assets 353 302 320 77 79 81

19 Property, Plant and Equipment

ComputerLand Buildings Buildings Furniture & Office Operating

$ millions Freehold Freehold Leasehold & Fittings Equipment Software Total


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 - - 4 3 6 - 13Depreciation - - (5) (3) (8) (1) (17)Closing Net Book Value 24 28 38 24 37 4 155

Cost / Valuation 24 28 97 84 154 22 409Accumulated Depreciation - - (59) (60) (117) (18) (254)Closing Net Book Value 24 28 38 24 37 4 155

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

Banking Group

On 1 July 2008 ASB Bank Limited purchased 100% of the ordinary capital of Aegis Limited, ASB Group Investments Limited, Investment CustodialServices Limited and Jacques Martin New Zealand Limited from fellow subsidiaries of CBA for consideration of $58m. This resulted in recognition ofNet Tangible Assets of $10m and Intangible Assets of $48m in the Banking Group during the period ended 31 December 2008.

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 BankingGroup's financial statements as in-substance subsidiaries.


On 4 November 2008 ASB Properties Limited, a 100% owned subsidiary of ASB Bank Limited amalgamated with fellow subsidiary ASB ManagementServices Limited to become ASB Management Services Limited. This did not have any impact on the aggregated results or financial position of theBanking Group.

On 13 November 2008 Securitisation Management Services Limited was incorporated as a wholly owned subsidiary of ASB Bank Limited. This did nothave any impact on the aggregated results or financial position of the Banking Group.

On 14 November 2008 Medallion NZ Master Trust and Medallion NZ Series Trust 2008-1U were established by ASB Bank Limited 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. This didnot have any impact on the Consolidated financial statements of the Banking Group.

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

38


19 Property, Plant and Equipment (continued)

ComputerLand Buildings Buildings Furniture & Office Operating

$ millions Freehold Freehold Leasehold & Fittings Equipment Software Total


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 - - 4 2 4 - 10Disposals - - - (1) - - (1)Depreciation - - (4) (3) (8) (2) (17)Closing Net Book Value 24 27 36 24 34 6 151



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


Banking Group

Freehold land and buildings are carried at revalued amounts based on market valuations provided by independent, registered, public valuers. Thelatest market valuations were undertaken in April 2008 and were applied on 30 June 2008. The primary valuation approach has been based uponcomparable improved sales and land sales information supported by an income approach, based on market rentals which have been capitalised at amarket yield rate derived from improved property transactions. As at 31 December 2008 under the cost model these assets would have beenrecognised at a carrying amount of $7m and $12m respectively (31 December 2007 $5m and $13m, 30 June 2008 $7m and $10m).

The Registered Bank has no Property, Plant and Equipment as at 31 December 2008 (31 December 2007 Nil, 30 June 2008 Nil).

39


$ millions Unaudited Unaudited AuditedAs at 31-Dec-08 31-Dec-07 30-Jun-08

20 Intangible Assets

Goodwill 323 275 275Internally Generated Application Software 39 25 33External Application Software 22 24 23Total Intangible Assets 384 324 331

Goodwill

Balance at Beginning of Period 275 275 275Additions 48 - - Balance at End of Period 323 275 275

Internally Generated Application Software

Cost 48 26 26Accumulated Amortisation (15) (8) (8)Opening Net Book Value 33 18 18Additions 13 9 23Amortisation (7) (2) (8)Closing Net Book Value 39 25 33

Cost 61 35 48Accumulated Amortisation (22) (10) (15)Closing Net Book Value 39 25 33

External Application Software

Cost 72 62 62Accumulated Amortisation (49) (44) (44)Opening Net Book Value 23 18 18Additions 3 9 10Amortisation (4) (3) (5)Closing Net Book Value 22 24 23

Cost 75 71 72Accumulated Amortisation (53) (47) (49)Closing Net Book Value 22 24 23

The Registered Bank has no Intangible Assets as at 31 December 2008 (31 December 2007 Nil, 30 June 2008 Nil).

No impairment losses have been recognised against the carrying amount of Goodwill or Computer Software for the period ended 31 December 2008(31 December 2007 Nil, 30 June 2008 Nil).

Banking Group

Goodwill in the Banking Group arose from the initial purchase of 25% of ASB Group Limited by CBA Funding (NZ) Limited. Ownership of the 25% ofASB Group Limited was moved to ASB Holdings Limited when Commonwealth Bank of Australia restructured their New Zealand Operations on 1 July2001. ASB (Group) Holdings Limited and ASB Holdings Limited amalgamated with ASB Group Limited on 15 and 16 March 2006 respectively. Onamalgamation, ownership of ASB Bank Limited was transferred to ASB Group Limited (subsequently renamed ASB Holdings Limited).

Additional Goodwill arose from the purchase of Aegis Limited ($38m) and ASB Group Investments Limited ($10m) on 1 July 2008 (refer to Note 17).

40



21 Deferred Taxation Asset / (Liability)

Balance at Beginning of Period (195) (342) (342) 4 9 9Taxation Benefit / (Expense) Recognised in

the Income Statement 34 34 66 3 (2) - Deferred Taxation Recognised in Equity 249 (13) 81 - (5) (5)Balance at End of Period 88 (321) (195) 7 2 4

Deferred Taxation relates to:Asset Revaluation Reserves (5) (5) (5) - - - Cash Flow Hedge Reserves 242 (101) (7) - - - Contributed Capital - Redeemable Preference Shares (210) (210) (210) - - - Depreciation 104 7 127 - - - Holiday Pay 6 6 6 - - - Provision for Impairment Losses 53 30 36 7 2 4Other Temporary Differences (102) (48) (142) - - - Total Deferred Taxation Asset / (Liability) 88 (321) (195) 7 2 4

Deferred Taxation Recognised in the Income Statement:Deferred Fees - 30 30 - - - Depreciation (23) (1) (16) - - - Provision for Impairment Losses 17 - 6 3 - 2Other Temporary Differences 40 5 46 - (2) (2)Total Deferred Taxation Recognised in

the Income Statement 34 34 66 3 (2) -

Deferred Taxation Recognised in Equity:Cash Flow Hedge Reserves 249 (13) 81 - (5) (5)Total Deferred Taxation Recognised in Equity 249 (13) 81 - (5) (5)

22 Due to Other Banks

646 598 638 5 - - 6,993 6,157 7,162 5,278 4,191 5,341

Total Due to Other Banks 7,639 6,755 7,800 5,283 4,191 5,341

Amounts Due to Other Banks are measured as follows:

(a) At Amortised CostCall 545 545 545 5 - - Term 6,993 5,962 7,127 5,278 4,191 5,341Total at Amortised Cost 7,538 6,507 7,672 5,283 4,191 5,341

(b) At Fair Value through Profit or LossCall 101 53 93 - - - Term - 195 35 - - - Total at Fair Value through Profit or Loss 101 248 128 - - -

As at 31 December 2008 the principal at maturity of amounts Due to Other Banks designated as at fair value is $101m for the Banking Group andNil for the Registered Bank (31 December 2007 $248m for the Banking Group and Nil for the Registered Bank, 30 June 2008 $128m for theBanking 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 ofDeferred Tax as at 31 December 2008, 31 December 2007 and 30 June 2008.

CallTerm

ASB Bank Limited has entered into Credit Support Annexes ("CSA") in respect of certain credit exposures relating to derivative transactions. As at31 December 2008 deposits of $25m relating to collateral received were included in Due to Other Banks (31 December 2007 Nil, 30 June 2008Nil).

41



23 Money Market Deposits

Money Market Deposits are measured as follows:

(a) At Amortised CostCall 2 - - - - - Term 214 - - - - - Certificates of Deposit 435 - - - - - Other Issued Paper 4,457 2,374 3,319 - - - Total at Amortised Cost 5,108 2,374 3,319 - - -

(b) At Fair Value through Profit or LossCall 2,220 2,627 2,380 - - - Term 1,173 1,426 1,467 - - - Non-interest Bearing 716 44 133 - - - Certificates of Deposit 3,221 2,583 1,920 - - - Other Issued Paper 8,498 9,025 10,821 - - - Total at Fair Value through Profit or Loss 15,828 15,705 16,721 - - -

Total Money Market Deposits 20,936 18,079 20,040 - - -

Net Investment Hedge

24 Deposits from Customers

Retail Term Deposits 16,117 14,484 15,712 - - - Other Deposits Bearing Interest 12,335 10,130 10,390 293 1,015 851Deposits Not Bearing Interest 1,733 1,873 1,719 - - - Total Deposits from Customers 30,185 26,487 27,821 293 1,015 851

25 Other Liabilities

Interest Payable Accrued 427 333 418 38 42 75Employee Entitlements 34 44 63 - - - Trade Accounts Payable and Other Liabilities 140 113 254 6 2 3Total Other Liabilities 601 490 735 44 44 78

The Registered Bank does not have any retail deposits (deposits with natural persons, excluding deposits with an outstanding balance whichexceeds $250,000) as at 31 December 2008 (31 December 2007 Nil, 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 BankLimited or the Registered Bank was put into liquidation or ceased to trade, secured creditors and those creditors set out in the Seventh Schedule ofthe 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 period ended 31December 2008 (31 December 2007 Nil, 30 June 2008 Nil).


For the period ended 31 December 2008 a gain of $6m was attributable to changes in credit risk for Money Market Deposits designated at FairValue through Profit or Loss (31 December 2007 Nil, 30 June 2008 $9m). All other changes in Fair Value are attributable to changes in thebenchmark interest rate. Refer to Note 1 for details of the fair valuation methodology.

As at 31 December 2008 the principal at maturity of Money Market Deposits at fair value through Profit or Loss was $15,611m for the BankingGroup and Nil for the Registered Bank (31 December 2007 $15,570 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 31 December 2008 the Banking Group had no borrowings designated as net investment hedges. In previous periods Yen denominatedborrowing included within Other Issued Paper at Fair Value through Profit or Loss, together with related forward exchange rate contracts, wasdesignated as a hedge of the Banking Group's net investment in a subsidiary and hedged the Banking Group's exposure to the foreign currencyrisk associated with this investment. The fair value of the borrowing was $438m as at 31 December 2007 and $717m as at 30 June 2008. Gainsor losses on translation of this borrowing to the date of the termination of the hedge have been transferred to FCTR within equity, to offset anygains or losses on translation of the net investment in the subsidiary.

42



26 Subordinated Debt

Issuer Face Value FootnoteASB Bank Limited NZD 200m (a) 201 201 201 - - - ASB Bank Limited NZD 250m (b) 250 250 248 - - - ASB Bank Limited * NZD 370m (c) 419 372 380 - - - ASB Holdings Limited NZD 1m (d) - - 1 - - - ASB Holdings Limited NZD 160m (e) 160 - 160 - - - CBA Funding (NZ) Limited NZD 700m (f) 1 1 1 - - - CBA Real Estate Funding (NZ) Limited NZD 4m (g) 2 2 2 - - - CBA USD Funding Limited * USD 700m (h) 1,463 950 970 - - - CBA New Zealand Branch AUD 750m (i) 898 849 946 898 849 946CBA New Zealand Branch * USD 550m (j) 1,107 727 742 1,107 727 742CBA New Zealand Branch AUD 1,166m (k) 1,398 1,322 1,478 1,398 1,322 1,478CBA New Zealand Branch USD 700m (l) - - - 1,463 950 970CBA New Zealand Branch NZD 120m (m) - - - - 121 -

5,899 4,674 5,129 4,866 3,969 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) 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 (referto 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 thediscretion 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 toany rights in respect of Ordinary Shares but after any rights in respect of all other classes of shares in CBA Funding (NZ) Limited ranking aheadof the Redeemable Preference Shares.

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

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

Redeemable Preference Shares (NZD1m) issued to CBA Hong Kong branch on 16 June 2008 with a maturity date of 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 orany earlier date immediately prior to the date on which the liquidation of CBA Funding (NZ) Limited commences. They can also be redeemedearlier with the consent of the holder.

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

Redeemable Preference Shares (NZD 160m) issued to CBA on 30 June 2008 with a maturity date of 30 June 2009.

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 amargin 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 andhave 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 15November 2017.


All Subordinated Debt issued by ASB Bank Limited carried an AA- rating from Standard and Poor's Pty Limited as at 31 December 2008. It issubordinate to other general liabilities of ASB Bank Limited and qualifies as Lower Tier Two Capital for ASB Bank Limited's Capital Adequacycalculation 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 forthe 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.

43


26 Subordinated Debt (continued)

CBA USD Funding Limited(h)

CBA New Zealand Branch (Registered Bank)(i)

(j)

(k)

(l)

(m)

* Subordinated Debt is recognised in the Balance Sheet at its New Zealand dollar equivalent. The Banking Group has entered into Cash Flow andFair 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 paidsemi-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 CBAthe convertible notes rank equally with Ordinary Shares.

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

Subordinated Notes (NZD 120m) issued to ASB Bank Limited on 2 November 2007, which carried a coupon rate based on the Bank Bill ratereset quarterly plus a margin of 0.70% per annum. These notes were repaid in March 2008.

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

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 quarterlyuntil 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 automatically convert to CBA preference shares on 6 January 2044. The coupon rate is reset against theAUD 90 day Bank Bill Rate plus a margin.

44



27 Head Office Account and Contributed Capital

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

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

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

Total Contributed Capital 1,975 1,805 1,975 - - -

Ordinary Shares

Redeemable Preference Shares

28 Asset Revaluation Reserves

Balance at Beginning of Period 29 27 27 - - - Revaluations - - 3 - - - Transferred to Retained Earnings - - (1) - - - Balance at End of Period 29 27 29 - - -

29 Available for Sale Reserves

Balance at Beginning of Period 19 - - - - - Net (Loss) / Gain from Changes in Fair Value (6) - 64 - - - Transferred to Profit or Loss - - (45) - - - Balance at End of Period 13 - 19 - - -

30 Cash Flow Hedge Reserves

Balance at Beginning of Period 6 191 191 (11) (13) (13)Net (Loss) / Gain from Changes in Fair Value (791) 250 72 12 (7) (7)Transferred to Profit or Loss (24) (224) (342) 4 10 10Deferred Tax 249 (13) 81 - (5) (5)Current Tax (5) 4 4 (5) 4 4Balance at End of Period (565) 208 6 - (11) (11)


No Ordinary Shares were issued during the period ended 31 December 2008 and there were no shares issued during the period ended 31 December2007. During the year ended 30 June 2008 170,000,000 Ordinary Shares were issued by ASB Holdings Limited to Commonwealth Bank of Australia.

As at 31 December 2008 the Banking Group had 727,546,881 Ordinary Shares on issue of which 100,000 were unpaid (31 December 2007557,546,881 Issued of which 100,000 were unpaid, 30 June 2008 727,546,881 Issued of which 100,000 were unpaid).

Head Office Account comprises funds provided by Commonwealth Bank of Australia to support its New Zealand branch. It is non-interest bearing andthere is no fixed date for repatriation.

Asset Revaluation Reserves relate to revaluation gains on land and buildings carried at valuation, except that to the extent that the gain reverses arevaluation 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 isderecognised or impaired.

Cash Flow Hedge Reserves comprise the effective portion of the cumulative net change in the fair value of foreign exchange and interest ratederivative 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 BankLimited 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 period ended 31 December 2008. During the period ended 31 December 2007 780,000,000Redeemable Preference Shares were issued and were classified as equity. These shares have no fixed term, carry no voting rights and areredeemable 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 31 December 2008 the Banking Group had 1,484,240,000 Issued and Fully Paid Redeemable Preference Shares (31 December 20071,484,240,000, 30 June 2008 1,484,240,000 Issued and Fully Paid Preference Shares).

Redeemable Preference Shares includes the equity component of Redeemable Preference Shares issued by CBA Funding (NZ) Limited and CBA RealEstate 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) fora description of the terms of the Redeemable Preference Shares.

45



31 Foreign Currency Translation Reserves

Balance at Beginning of Period - - - - - - Currency Translation Differences 172 43 78 - - - Net Investment Hedge (240) (64) (116) - - - Current Income Tax 69 21 38 - - - Balance at End of Period 1 - - - - -

32 Retained Earnings

Balance at Beginning of Period 569 689 689 21 7 7213 243 456 29 15 22782 932 1,145 50 22 29

Add:Transfer from Asset Revaluation Reserve - - 1 - - -

Less:Ordinary Dividends - - 510 - - - Redeemable Preference Dividends 29 28 59 - - - Distribution of Prior Year Profit - 8 8 - 8 8Balance at End of Period 753 896 569 50 14 21

33 Minority Interests

Controlled Entities: Share Capital 550 550 550 - - -

Perpetual Preference Dividends paid to Minority Interests

ASB Capital Limited 7 6 13 - - - ASB Capital No. 2 Limited 11 10 21 - - -

18 16 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

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%. Thegross dividend rate paid on the Perpetual Preference Shares for the period ended 15 May 2008 was 9.11% per annum. Rates are reset annually on 1May or succeeding business day. The rate was reset on 15 May 2008 to 9.03% per annum. The next dividend reset date is 15 May 2009.

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

Net Profit after Taxation Attributed to Parent Company

On 13 January 2009 the Directors of ASB Capital Limited declared a Perpetual Preference Dividend of $3m, being 1.68 cents per share. The dividendwas paid on 16 February 2009 to all registered holders of Perpetual Preference Shares as at 5.00pm on 30 January 2009.

Also, on 13 January 2009 the Directors of ASB Capital No.2 Limited declared a Perpetual Preference Dividend of $8m, being 2.26 cents per share.The dividend was paid on 16 February 2009 to all registered holders of Perpetual Preference Shares as at 5.00pm on 9 February 2009.

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


As at 31 December 2008 the Banking Group had 550,000,000 Issued and Fully Paid Perpetual Preference Shares (31 December 2007 550,000,000Issued and Fully Paid Perpetual Preference Shares, 30 June 2008 550,000,000 Issued and Fully Paid Perpetual Preference Shares). These sharesconstitute 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 issued350,000,000 Perpetual Preference Shares. These shares have no fixed term, are non-redeemable and carry limited voting rights. They were issued aspart 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 PerpetualPreference Shares to ASB Funding Limited. ASB Funding Limited in turn invested the proceeds in Perpetual Preference Shares issued by ASB BankLimited. ASB Funding Limited and New Zealand Guardian Trust Company Limited (the "Trustee") together with ASB Capital Limited and ASB CapitalNo.2 Limited respectively are party to Trust Deeds, whereby ASB Funding Limited provides covenants to the Trustee for the benefit of holders of theASB 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 grossdividend rate paid on the Perpetual Preference Shares for the period ended 15 November 2008 was 9.95% per annum. Rates are reset annually on15 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 15November 2009.

Dividends on Perpetual Preference Shares were 3.44 cents per share (31 December 2007 2.96 cents per share, 30 June 2008 6.30 cents per share)paid by ASB Capital Limited and 3.13 cents per share (31 December 2007 3.05 cents per share, 30 June 2008 6.10 cents per share) paid by ASBCapital No.2 Limited for the period ended 31 December 2008.

46



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


Add: Non-cash ItemsImpairment Losses on Advances 85 5 47 18 - 7Depreciation 17 17 35 - - - Amortisation of Intangible Assets 11 5 13 - - - Net Loss on Sale of Property, Plant and Equipment - - 1 - - -

113 27 96 18 - 7Add: Movements in Balance Sheet ItemsChanges in Operating Assets and Liabilities (1,402) (1,735) (2,560) (142) (52) (25)Interest Receivable - (Increase) / Decrease (26) (98) (171) 11 (12) (16)Interest Payable - Increase / (Decrease) 165 52 217 (33) (20) 38Other Income Accrued - Decrease / (Increase) 530 149 502 (37) 30 18Operating Expenses Accrued - (Decrease) / Increase (21) 4 18 3 (1) - Taxation Balances - Increase (3) 57 44 12 2 -

(757) (1,571) (1,950) (186) (53) 15Net Cash Flows from Operating Activities (431) (1,285) (1,364) (139) (38) 44

35 Reconciliation of Cash and Cash Equivalents to the Balance Sheet

Cash and Call Deposits with the Central Bank 1,291 1,412 1,155 79 8 59Call Deposits Due from Other Banks 418 62 43 55 98 9Call Deposits Due to Other Banks (646) (598) (638) (5) - - Total Cash and Cash Equivalents at End of Period 1,063 876 560 129 106 68

36 Imputation and Policyholder Credit Accounts

Imputation Credit Account

Balance at Beginning of Period 13 79 79 - - - Transfer from the PCA - - 57 - - - Net Income Tax Paid (Refunded) / Paid (2) (49) 38 - - - Imputation Credits Attached to Dividends Received 11 15 106 - - - Imputation Credits Attached to Dividends Paid (13) (20) (267) - - - Balance at End of Period 9 25 13 - - -

Balance at Beginning of Period - 57 57 - - - Transfer to ICA - - (57) - - - Closing Balances of Associates Leaving the ICA Group - - - - - - Balance at End of Period - 57 - - - -

ASB Capital Limited and ASB Capital No.2 Limited are not members of the ICA Group. ASB Capital Limited had a debit imputation credit accountbalance of $1m (31 December 2007 Nil, 30 June 2008 $1m credit). ASB Capital No.2 Limited had a Nil closing imputation credit account balance (31December 2007 $1m debit, 30 June 2008 $1m credit).

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 balancein a PCA can be transferred back to an imputation credit account and is therefore available to shareholders (and shareholders of other ICA Groupmembers).


Dividends paid by companies may attach imputation credits representing the New Zealand tax already paid by the company or tax group on profits. NewZealand 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 ICAGroup.

47


37 Related Party Transactions and Balances

Guarantees

Derivative Transactions

Other

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

During the period ended 31 December 2008, the Banking Group has entered into, or had in place various financial transactions with members of theCommonwealth Bank Group, and other related parties. ASB Bank Limited provides administrative functions to some subsidiaries and relatedcompanies for which no payments have been made. In all other cases, arrangements with related parties were conducted on an arm's length basisand on normal commercial terms, and within the Banking Group's approved policies. Loans to and borrowings from related parties are unsecured.

Receipts of $9m (31 December 2007 $11m, 30 June 2008 $23m) were received from the Commonwealth Bank of Australia New Zealand LifeInsurance Group, for administrative functions provided by ASB Bank Limited.

No receipts (31 December 2007 $11m, 30 June 2008 $22m) were received from the Commonwealth Bank of Australia New Zealand Life InsuranceGroup for the utilisation of tax-related items.

Distribution and Administrative Services

Transactions processed during the period ended 31 December 2008 included:

The Banking Group has in place interest rate swaps with Commonwealth Bank Group with a face value of $13,072m (31 December 2007 $6,005m,30 June 2008 $8,565m), interest rate options with a face value of $737m (31 December 2007 $312m, 30 June 2008 $312m), currency swaps with aface value of $7,682m (31 December 2007 $9,075m, 30 June 2008 $8,240m), foreign exchange contracts with a face value of $1,990m (31December 2007 $2,827m, 30 June 2008 $2,931m), forward commodity contracts with a face value of $2m (31 December 2007 $1m, 30 June 2008face value $1m), and no forward rate agreements (31 December 2007 $1,200m, 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 31 December 2008 were $1,157m (31 December 2007 $981m,30 June 2008 $1,073m) and total interest expense related to these deposits for the period ended 31 December 2008 was $43m (31 December 2007$47m, 30 June 2008 $94m). These deposits are held on normal commercial terms and conditions. In comparative periods the Commonwealth Bank ofAustralia New Zealand Life Insurance Group managed and administered these Trusts.

Commonwealth Bank Group provides guarantees over various lending offered by ASB Bank Limited to the value of $183m (31 December 2007$103m, 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$1,673m (31 December 2007 $1,505m, 30 June 2008 $1,383m) and interest rate swaps with a face value of $1,814m (31 December 2007 $1,814m,30 June 2008 $1,814m) upon which interest paid amounted to $1m (31 December 2007 $5m, 30 June 2008 $10m).

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 $240m as at 31 December 2008 (31 December 2007 $286m, 30June 2008 $125m).

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

No Provisions for Impairment Loss have been recognised in respect of loans given to Related Parties (31 December 2007 Nil, 30 June 2008 Nil).

ASB Bank Limited had foreign exchange contracts with Trusts managed or administered by the Commonwealth Bank of Australia New Zealand LifeInsurance Group with a face value of $656m (31 December 2007 $1,175m, 30 June 2008 $776m).

A payment of $7m (31 December 2007 $7m, 30 June 2008 $13m) was made to the Commonwealth Bank of Australia New Zealand Life InsuranceGroup, for the origination of mortgages.

A payment of $3m (31 December 2007 $3m, 30 June 2008 $4m) was made to Commonwealth Bank Group for arrangement fees.

Receipts of $16m (31 December 2007 $9m, 30 June 2008 $24m) were received from the Commonwealth Bank of Australia New Zealand LifeInsurance Group, for insurance commission and profit share.

No receipts (31 December 2007 $7m, 30 June 2008 $13m) were received from the Commonwealth Bank of Australia New Zealand Life InsuranceGroup, for distribution of fund management services. In comparative periods the Commonwealth Bank of Australia New Zealand Life Insurance Groupmanaged and administered these services. Since 1 July 2008 the entity providing these services, ASB Group Investments Limited, has been a 100%owned subsidiary of ASB Bank Limited.

Receipts of $7m (31 December 2007 Nil, 30 June 2008 Nil) were received from the Commonwealth Bank of Australia New Zealand Life InsuranceGroup, for investment management fees.

48



37 Related Party Transactions and Balances (continued)

Related Party Balances (continued)Commonwealth Bank Group (100% Ultimate Shareholder)

Due from Other BanksBalance at Beginning of Period 169 297 297 3,796 3,709 3,709Net Movement (119) (217) (128) 106 87 87Balance at End of Period 50 80 169 3,902 3,796 3,796

Interest Income on Due from Other Banks 2 8 10 171 185 356

Advances to CustomersBalance at Beginning of Period - - - 1,167 479 479Net Movement - - - (675) 700 688Balance at End of Period - - - 492 1,179 1,167

Other Assets 6 3 4 31 39 37

Due to Other BanksBalance at Beginning of Period 7,697 7,086 7,086 5,341 4,202 4,202Net Movement (148) (430) 611 (58) (11) 1,139Balance at End of Period 7,549 6,656 7,697 5,283 4,191 5,341

Interest Expense on Due to Other Banks 137 279 270 262 238 504

Subordinated DebtBalance at Beginning of Period 4,550 4,771 4,771 4,136 2,777 2,777Net Movement 729 (670) (221) 730 275 1,359Balance at End of Period 5,279 4,101 4,550 4,866 3,052 4,136

Interest Expense on Subordinated Debt 146 89 247 103 89 191

Derivative Liabilities / (Assets)Balance at Beginning of Period 229 738 738 451 605 605Net Movement (174) (140) (509) (452) (70) (154)Balance at End of Period 55 598 229 (1) 535 451

Deposits from CustomersBalance at Beginning of Period - - - 728 1,644 1,644Net Movement - - - (672) (10) (916)Balance at End of Period - - - 56 1,634 728

Other Liabilities 57 81 134 37 56 75

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

Derivative Assets / (Liabilities)Balance at Beginning of Period 14 (76) (76) - - - Net Movement 24 37 90 - - - Balance at End of Period 38 (39) 14 - - -

Other Assets 8 8 8 - - -

Deposits from CustomersBalance at Beginning of Period 537 494 494 - - - Net Movement 34 90 43 - - - Balance at End of Period 571 584 537 - - -

Interest Expense on Deposits from Customers 22 23 47 - - -

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

Other Liabilities 4 4 1 - - -

Derivative Assets / (Liabilities)Balance at Beginning of Period 22 (23) (23) - - - Net Movement - (1) 45 - - - Balance at End of Period 22 (24) 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)

49



38 Directors and Key Management Personnel

Key Management Compensation

Short Term Employee Benefits 8 8 6Other Long Term Benefits 6 2 5Total Key Management Compensation 14 10 11

Loans to Directors and Key Management Personnel

Balance at Beginning of Period 8 9 9Adjustment due to change in Key Management Personnel 1 (1) (1)Received During the Period 4 5 8Repaid During the Period (5) (6) (8)Balance at End of Period 8 7 8

Interest Income* - - -

Deposits from Directors and Key Management Personnel

Balance at Beginning of Period 7 6 6Adjustment due to change in Key Management Personnel (1) - - Received During the Period 18 18 31Repaid During the Period (18) (16) (30)Balance at End of Period 6 8 7

Interest Expense* - - -

*

As at$ millions Notional Credit Notional Credit Notional Credit

Amount Equivalent Amount Equivalent Amount Equivalent

39 Credit and Capital Commitments, and Contingent Liabilities

(a) Credit and Capital CommitmentsLending Commitments Approved but Not Yet Advanced 10,931 2,158 10,398 2,040 10,702 2,199Capital Expenditure Commitments 19 19 11 11 4 4

Total Credit and Capital Commitments 10,950 2,177 10,409 2,051 10,706 2,203

Credit and Capital CommitmentsLending Commitments Approved but Not Yet Advanced 3,064 1,090 2,552 841 2,397 881

(b) Contingent LiabilitiesGuarantees 62 62 61 61 57 57Standby Letters of Credit 100 100 113 113 152 152Other Credit Facilities 92 41 85 35 103 46Other Contingent Liabilities 1 - - - 1 -

Total Contingent Liabilities 255 203 259 209 313 255

Banking Group

The Registered Bank has no contingent liabilities as at 31 December 2008 (31 December 2007 Nil, 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 7.3% and 20.5% (31 December 2007 7.4% and 20.75%, 30 June 2008 7.3% and 20.75%). Terms ofrepayment range between variable, fixed rates up to three years, and interest only loans, all of which have been in accordance with ASB Bank Limited'slending policies.

Deposits consist of on call, savings, cheque, term investments and cash management balances, all lodgements being made and conducted on an arm'slength 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 rounding tothe nearest million.

Interest rates are from 0% to 9.0% (31 December 2007 0% to 8.91%, 30 June 2008 0% to 9.25%), terms of repayment ranging between on call and sixmonths.

Unaudited Unaudited31-Dec-07

Audited30-Jun-08

Banking Group

Registered Bank

Banking Group

31-Dec-08

50


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 period:

Within One Year of Balance Date 39 35 36 - - - Between One and Two Years 35 30 32 - - - Between Two and Five Years 76 68 69 - - - Over Five Years 39 30 24 - - -

Total Leasing Commitments 189 163 161 - - -

Other Commitments 5 8 7 - - -

The Banking Group has other contingent liabilities in respect of actual and potential claims and proceedings. An assessment of theBanking Group's likely loss in respect of these matters has been made on a case-by-case basis and provision made where appropriate.

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

ASB Bank Limited has entered into certain sub-leasing arrangements. Sub-leasing income of $1m for the period ended 31 December 2008 (31December 2007 $1m, 30 June 2008 $1m) was included in the Income Statement.


On the basis NOPAs or assessments will be issued to ASB Bank Limited for all similar transactions, and for all tax years from 2001onward, the combined assessments and adjustments proposed by the IRD would result in a net potential tax liability of $291m up to 31December 2008 (including use of money interest charges).

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

In November 2006 the Commerce Commission issued proceedings against Visa, MasterCard and 11 financial institutions, including ASBBank Limited, for alleged price fixing in relation to interchange fees. Also in November 2006, similar proceedings were issued against thesame defendants by 11 retailers. No provisions have been made in these financial statements relating to these claims.

As previously disclosed in the General Disclosure Statement for the year ended 30 June 2008, the New Zealand Inland RevenueDepartment ("IRD") is carrying out an industry-wide review of structured finance transactions. ASB Bank Limited has received Notices ofProposed Adjustments ("NOPAs") from the IRD in respect of structured finance transactions for the years ended 30 June 2001 to 30 June2006.

A NOPA is not an amended assessment of tax. It is the first step in New Zealand's tax disputes process, under which the IRD formallyadvises a taxpayer that they are proposing to amend a tax assessment. Notices of amended assessment have now been received inrelation to transactions covering the 2001 and 2003 years.

51


41 Fair Value of Financial Instruments

Carrying Fair Carrying Fair$ millions Amount Value Amount Value

Balance Sheet Items


Cash and Call Deposits with the Central Bank 1,291 1,291 79 79Due from Other Banks at Amortised Cost 162 162 3,902 3,902Advances to Customers 58,278 58,098 5,962 5,796Other Assets 353 353 77 77

Due to Other Banks at Amortised Cost 7,538 7,541 5,283 5,283Money Market Deposits at Amortised Cost 5,108 5,232 - - Deposits from Customers 30,185 30,208 293 293Other Liabilities 601 601 44 44Subordinated Debt 5,899 4,200 4,866 3,214



Due to Other Banks at Amortised Cost 6,507 6,507 4,191 4,191Money Market Deposits at Amortised Cost 2,374 2,379 - - Deposits from Customers 26,487 26,466 1,015 1,015Other Liabilities 490 490 44 44Subordinated Debt 4,674 4,658 3,969 3,969



Due to Other Banks at Amortised Cost 7,672 7,447 5,341 5,341Money Market Deposits at Amortised Cost 3,319 3,253 - - 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 BankingGroup'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

52


42 Capital Adequacy

Regulatory Changes - Basel II

>>>

The Basel Committee has issued a revised framework for the calculation of capital adequacy for banks, commonly known as Basel II. The ASBBanking Group was accredited by the RBNZ to adopt the internal ratings based approach for calculating regulatory capital requirements under Basel IIfrom 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 RiskExposures, as well as operational risk and both traded and non-traded market risk, estimated in accordance with RBNZ banking supervisionguidelines.

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 thisdisclosure statement). The RBNZ registration requirements set out, among other things, minimum regulatory capital requirements for banks that areconsistent with the internationally agreed framework developed by the Basel Committee on Banking Supervision. These capital requirements definewhat is acceptable as qualifying regulatory capital and provide for methods of measuring the risks incurred. The ASB Banking Group and CBA NewZealand Branch must comply with RBNZ registration requirements, including any minimum capital adequacy ratios under the Conditions ofRegistration for each respective banking licence.

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

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 riskweightings may not be consistent with the loss experience of the Banking Group. In addition there are RBNZ banking supervision guidelines forstandard market risk measurement and disclosure for both traded and non traded banking assets.

The Capital Adequacy table on page 61 summarises the capital adequacy ratios for the Overseas Banking Group as at 31 December 2008. RiskWeighted Exposures for the Banking Group are set out on the following pages. During the period ended 31 December 2008 and the comparativeperiods shown, the Banking Group complied with all of the RBNZ capital requirements to which it is subject. No changes have been made to theBoard approved levels of regulatory capital to be held during the year for either ASB Bank Limited or CBA. However, ASB Bank Limited internalcapital risk models and measures have been reviewed in connection with implementation of Basel II capital requirements.

The Boards of Directors for ASB Bank Limited and CBA (the Overseas Bank) have ultimate responsibility for capital adequacy, and approve capitalpolicy and minimum capital levels and limits. These are typically at a higher level than required by the regulator to reduce the risk of breachingconditions of registration. ASB Bank Limited and CBA each operate an Asset and Liability Management Committee (“ALCO”) that actively monitorsthe respective capital adequacy, and reports this on a regular basis to senior management and the respective Board risk committees. This includesforecasting capital requirements so that any capital requirements can be executed in a timely manner. The capital adequacy process considers otherstakeholder requirements (including rating agencies and taxation requirements) when managing capital, and uses a mix of capital instruments toreduce 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.

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 ofbanks. Basel II consists of three pillars: Pillar One covers capital requirements for banks for credit, operational, and market risks; Pillar Two covers allother 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 Branchwill continue to report under the previous Basel framework ("Basel I" approach) and there will be little change to the disclosures in the BankingGroup'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 adequacy are to comply at all times with the regulatory capital requirements set by theRBNZ; to maintain a strong capital base to cover the inherent risks of the business in excess of that required by rating agencies to maintain theinvestment credit gradings within the group; and to support the future development and growth of the business to maximise shareholders’ value.

Regulatory capital is divided into Tier One and Tier Two Capital. Tier One Capital primarily consists of Shareholder’s Equity and other capitalinstruments acceptable to the RBNZ, less Intangible Assets and other prescribed deductions. Tier Two Capital consists of two levels, with Upper TierTwo Capital comprising Asset Revaluation Reserves and Foreign Currency Translation Reserves, and Lower Tier Two Capital comprisingSubordinated 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 toarrive at Total Regulatory Capital.

53


42 Capital Adequacy (continued)

RISK WEIGHTED EXPOSURES


RiskPrincipal Risk WeightedAmount Weight Exposure

$ millions % $ millions

Balance Sheet ExposuresCash and Short Term Claims on Government 3,700 - - Long Term Claims on Government 236 10 24Claims on Banks 4,524 20 904Claims on Public Sector Entities 269 20 54Claims Secured by Residential Mortgages 37,069 50 18,535Other 22,184 100 22,184Non-risk Weighted Assets 4,281 - - Total Balance Sheet Exposures 72,263 41,701(excludes Intangible Assets)

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

$ millions % $ millions % $ millions

Off Balance Sheet ExposuresDirect Credit Substitutes 163 100 163 100 163Commitments with Certain Drawdown 821 100 821 61 500Underwriting and Sub-underwriting Facilities 1 50 1 100 1Transaction Related Contingent Items 74 50 37 100 37Short Term, Self-liquidating Trade Related Contingencies 18 20 4 100 4

One Year or More 2,711 50 1,356 100 1,356 Less Than One Year or Can Be Cancelled at Any Time 7,418 - - - -

Market Related Contracts (Current Exposure):Foreign Exchange Contracts 29,291 7 2,165 23 505Interest Rate Contracts 111,780 2 2,626 24 624Other 4 75 3 33 1

Total Off Balance Sheet Exposures 3,191

Total Risk Weighted Exposures 44,892

Banking Group

Other Commitments to Provide Financial Services with Original Maturity of:

54



RISK WEIGHTED EXPOSURES (continued)




Balance Sheet ExposuresCash and Short Term Claims on Government 1,834 - - Long Term Claims on Government 1,066 10 107Claims on Banks 3,566 20 713Claims on Public Sector Entities 199 20 40Claims Secured by Residential Mortgages 34,875 50 17,438Other 19,072 100 19,072Non-risk Weighted Assets 975 - - Total Balance Sheet Exposures 61,587 37,370(excludes Intangible Assets)



Off Balance Sheet ExposuresDirect Credit Substitutes 174 100 174 100 174Commitments with Certain Drawdown 1,095 100 1,095 60 661Transaction Related Contingent Items 59 51 30 100 30Short Term, Self-liquidating Trade Related Contingencies 25 20 5 100 5

One Year or More 1,910 50 956 100 956 Less Than One Year or Can Be Cancelled at Any Time 7,404 - - - -

Market Related Contracts (Current Exposure):Foreign Exchange Contracts 26,751 3 787 26 202Interest Rate Contracts 85,046 1 990 22 213Other 26 12 3 100 3



Banking Group


55







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)



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



Banking Group


56







Balance Sheet ExposuresCash and Short Term Claims on Government 468 - - Claims on Banks 3,902 20 780Other 6,040 100 6,040Non-risk Weighted Assets 608 - - Total Balance Sheet Exposures 11,018 6,820



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

One Year or More 2,179 50 1,090 100 1,090 Less Than One Year or Can Be Cancelled at Any Time 885 - - - -

Market Related Contracts (Current Exposure):Foreign Exchange Contracts 5,402 2 124 23 28Interest Rate Contracts 2,501 2 55 31 17

Total Off Balance Sheet Exposures 1,135Total Risk Weighted Exposures 7,955

Registered Bank

57











One Year or More 1,682 50 841 100 841 Less Than One Year or Can Be Cancelled at Any Time 870 - - - -


Total Off Balance Sheet Exposures 901


Registered Bank

58











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


Total Off Balance Sheet Exposures 953


Registered Bank

59



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

$ millionsAs at 31 December 2008

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

Value of Exposures 12,966 7,616 13,763 5,209 2,021 41,575 31.2% 18.3% 33.1% 12.5% 4.9% 100%

Percentage of Exposures: With 100% LMI 0.9% 0.8% 1.1% 0.5% 0.1% 0.9% With top 20% LMI 5.0% 7.8% 7.6% 20.4% 24.7% 9.3%

MARKET RISK EXPOSURE

Exposures as atInterest Foreign Interest Foreign Interest Foreign

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

Implied Risk-weighted Exposure 2,652 38 31 1,650 225 - 2,313 213 36

Notional Capital Charge 212 3 2 132 18 - 185 17 3

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

0.6% - - 0.5% 0.1% - 0.7% 0.1% -

Interest Foreign Interest Foreign Interest ForeignRate Currency Equity Rate Currency Equity Rate Currency Equity

$ millions Risk Risk Risk Risk Risk Risk Risk Risk Risk

Implied Risk-weighted Exposure 3,141 422 33 2,150 300 - 2,613 350 38

Notional Capital Charge 251 34 3 172 24 - 209 28 3

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

0.7% 0.1% - 0.6% 0.1% - 0.8% 0.1% -

CAPITAL ADEQUACY OF OVERSEAS BANK

31-Dec-07 30-Jun-08

Banking Group

Expressed as a Percentage of Total Exposures

31-Dec-08 31-Dec-07 30-Jun-08

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

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

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

Banking Group

Banking GroupPeak Exposures for Three Months ended

31-Dec-08

The Overseas Bank is Commonwealth Bank of Australia ("CBA"). The Overseas Banking Group is CBA and the various companies and otherworldwide entities owned and controlled by CBA.

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.

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

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 betterassess the Overseas Banking Group’s risk and reward assessment process.

60



CAPITAL ADEQUACY OF OVERSEAS BANK (continued)

$ millions Basel II Basel I Basel II Basel IIAs at 31 December 2008 2007 2008 2007

Tier One Capital as a % of Risk Weighted Exposures 9.2% 7.0% 8.8% 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 11.6% 10.0% 11.4% 12.1%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

>

>

–––

>

>–––

>

(1) December 2008 regulatory capital is calculated in accordance with Basel II rules and methodology which was effective from 1 January 2008including allowance for interest rate risk in the banking book, with effect from 1 July 2008. The December 2007 regulatory capital for the Overseas Bankis reported in accordance with Basel I rules and methodology.

Overseas Bank Overseas Banking Group

The Overseas Bank and the Overseas Banking Group's Capital Ratios (1) throughout the 2007 and 2008 financial years, and during the six monthsended 31 December 2008 exceeded both APRA minimum capital adequacy requirements.

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 ASB Group Investments Limited, a 100% ownedsubsidiary of ASB Bank Limited (refer Note 17). Funds Under Management distributed by ASB Bank Limited totalled $1,907m as at 31 December 2008(31 December 2007 $2,042m, 30 June 2008 $1,900m). ASB Bank Limited provides banking services for trusts managed or administered by ASB GroupInvestments 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. Shouldadverse conditions arise, it is considered that these policies and procedures will minimise the possibility that these conditions will adversely impact theBanking Group. The policies and procedures include comprehensive and prominent disclosure of information regarding products, and formal andregular 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 notguarantee 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 includedisclosures 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 period ended 31 December 2008 ASB Bank Limited established an in-house residential mortgage-backed securities ("RMBS") facility, whichcan issue securities that can be used as collateral for borrowing from the RBNZ. As at 31 December 2008 ASB Bank Limited had internally securitised$5.4bn of unrated RMBS through the Medallion NZ Series Trust 2008-1U . The transaction does not have any impact on the Consolidated financialstatements of the Banking Group.

Funds Under Management issued by ASB Group Investments Limited and distributed by ASB Group (Life) Limited, a fellow subsidiary of CBA, totalled$2,473m as at 31 December 2008.

The Banking Group does not conduct any insurance business. However, general and life insurance products are marketed through ASB Bank Limited'sbranch network. The life insurance products are underwritten by Sovereign Assurance Company Limited, a 100% 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 thedisclosures 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 forinsurance 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.

61


44 Financial Reporting by Segments

$ millions Retail Relationship Wholesale Other Unallocated Total

Primary Segment Information: Business


Total Operating Income 343 237 124 12 - 716Net Profit before Taxation 100 97 101 (7) - 291

Total Assets 33,774 24,915 13,341 436 181 72,647Total Liabilities 22,210 8,276 35,655 3,306 - 69,447

19 5 4 1 - 29Depreciation and Amortisation Expense 21 6 1 - - 28


Total Operating Income 321 222 76 66 - 685Net Profit before Taxation 149 193 59 (20) - 381

Total Assets 31,626 22,081 7,438 766 - 61,911Total Liabilities 20,132 9,220 25,670 3,016 125 58,163

16 9 1 2 - 28Depreciation and Amortisation Expense 17 4 1 - - 22


Total Operating Income 649 417 161 123 - 1,350Net Profit before Taxation 307 319 127 (45) - 708

Total Assets 32,892 24,346 8,035 976 74 66,323Total Liabilities 21,436 9,346 28,055 3,881 195 62,913

46 14 4 3 - 67Depreciation and Amortisation Expense 35 8 2 3 - 48

Secondary Segment Information: Geographical

Other: The Other Segment comprises other operations, none of which constitutes a separately reportable segment.

The Banking Group operates predominantly in the banking industry within New Zealand. The Banking Group has very limited exposure to risksassociated 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 isdetermined on an arm's length basis. Charges are eliminated within the Banking Group.

Unallocated: Income Tax Assets and Liabilities.

Banking Group

Acquisition of Property, Plant and Equipmentand Intangible Assets

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

The Wholesale Banking Segment incorporates transactions booked through ASB Bank Limited's Treasury and FinancialMarkets Division, including financial instruments trading, foreign currency transactions, debt issues and Certificates ofDeposit, 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.



Retail Banking:

Relationship Banking:Wholesale Banking:

62


45 Risk Management Policies

Introduction

The following sections describe the risk management framework components.

Credit Risk

Market risk

Traded Market Risk

VaR at 97.5% confidence level$ millionsAs at 31-Dec-08 31-Dec-07 30-Jun-08

6 months 6 months 12 months

Interest Rate Risk 0.67 0.71 0.69Exchange Rate Risk 0.20 0.16 0.16Diversification Benefit (0.12) (0.14) (0.11)

Total Market Risk 0.75 0.73 0.74

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 itsholdings of financial instruments.

ASB Bank Limited uses Value-at-Risk (VaR) models as the principal measure of market risk in both the traded and non-traded portfolios. For thetrading risk actual results are back tested to check the validity of the VaR model. In addition, because the VaR model cannot encompass all possibleoutcomes, tests covering a variety of stress scenarios are regularly performed to simulate the effect of extreme market conditions.

In the trading book VaR is used to capture interest rate, exchange rate, volatility, equity and commodities risk. VaR is calculated using a historicsimulation model with 520 days of data over a 1-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 Tradingbook is carried out and reported on a weekly basis. Stress tests capture a range of scenarios plus the VaR basis on 5 years of price data.

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

Market risk arises from the mismatch between assets and liabilities, both on and off balance sheet, and from controlled trading undertaken in pursuitof profit. The Banking Group is exposed to diverse financial markets including interest rates, foreign currencies, equities and commodities, andtransacts 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 the ASB Bank Limited's balance sheet management.

For the purposes of market risk management, ASB Bank Limited makes a distinction between traded and non-traded market risks. Traded marketrisk covers market risk arising from trading activity. Non-traded market risk covers market risks related to balance sheet management which ispredominantly interest rate risk.

Market risk includes liquidity, funding, price, interest rate, foreign exchange and equity risk. Details of the Banking Group’s policies for management ofthese risks are set out below.

Average VaR

The Banking Group is committed to the management of risk to achieve sustainability of service, employment and profits, and therefore, takes oncontrolled amounts of risk when considered appropriate. The risk management framework identifies, assesses, manages and reports risk and riskadjusted returns using an economic equity framework. This is targeted at ensuring that the Banking Group has sufficient capital to maintain aninvestment credit grading.

The risk management strategy of ASB Bank Limited is set by its Board of Directors through the Board Risk Committee. All of the Directors aremembers of the Board Risk Committee, which is chaired by the Chairman of the Board. Implementation of risk management strategy is theresponsibility of the Managing Director and is facilitated through formal executive committee forums for credit, market and operational risk. The Headof Group Finance and Risk Management has day-to-day responsibility for the 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 areseparated where feasible, and all material systems are subjected to regular internal audit. Periodic reviews of all risk management systems areundertaken by internal audit and, in respect of market risk, by CBA.

The Banking Group's external auditor may also review parts of the Banking Group's risk management framework that impact on significant aspects ofthe 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 BankingGroup's annual results.

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

CBA has in place an integrated risk management framework to identify, assess, manage and report risks and risk adjusted returns on a consistentand 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.

63


45 Risk Management Policies (continued)

(a)

Percentage of NIE 31-Dec-08 31-Dec-07 30-Jun-08

Exposure at End of Period 1.04% 0.44% 2.10%Past 12 Month Exposure - Average 1.41% 0.59% 0.98%Past 12 Month Exposure - High 2.60% 1.10% 2.11%Past 12 Month Exposure - Low 0.35% 0.26% 0.27%

(b) Economic VaR

$ millions 31-Dec-08 31-Dec-07 30-Jun-08

Exposure at End of Period 1.1 3.6 3.8 Past 12 Month VaR (97.5 percentile) - Average 2.9 4.2 4.0 Past 12 Month VaR (97.5 percentile) - High 5.5 6.5 6.5 Past 12 Month VaR (97.5 percentile) - Low 0.7 2.2 2.2

Overall strategic direction is provided by the Market Risk Committee which meets monthly. On a day-to-day basis, interest rate risk is monitored andmanaged within the Treasury and Financial Markets Division of ASB Bank Limited.

Future net interest earnings are regularly estimated employing existing interest rates, rates 1% above and below current levels and rates based onhistorical rate analysis. ASB Bank Limited manages the known and assumed repricing characteristics of its assets and liabilities as well as futurecommitments to put the Banking Group in a position to benefit from anticipated interest rate movements and to limit the risk of adverse interest ratemovements.

Repricing mismatches and simulation results on the market value of ASB Bank Limited’s assets and liabilities, including derivatives, are reportedmonthly by management to the Market Risk Committee and the Board Risk Committee, along with associated limits.

The Banking Group measures and manages Balance Sheet interest risk from two perspectives:

Cash flow interest rate risk is the potential for a change in interest rates to change net interest earnings, in the current reporting period and in futureyears. Fair value interest rate risk arises from the potential for a change in interest rates to cause a fluctuation in the fair value of financialinstruments. Interest rate risk arises from the structure and characteristics of the Banking Group's assets, liabilities and equity, and in the mismatchof repricing dates of its assets and liabilities. The Banking Group's objective is to manage interest rate risk to achieve stable and sustainable netinterest earnings in the long term.

The Banking Group reduces interest rate risk by seeking to match the repricing characteristics of its assets and liabilities. This is achieved bychanging the mix of assets and liabilities through marketing and pricing initiatives, by buying and selling long term securities, and through the use ofderivatives such as interest rate swaps and forward rate agreements. In managing this risk, ASB Bank Limited seeks to achieve a balance betweenreducing risk to earnings and market value from adverse interest rate movements, and enhancing net interest income through correct anticipation ofthe direction and extent of interest rate changes.

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 assets and liabilities have interest rate risk that is not fully captured within a measure of risk to the next 12 monthsearnings. To measure this longer-term sensitivity, the Banking Group utilises an economic VaR analysis. This analysis measures the potentialchange in the net present value of cash flows of assets and liabilities. Cash flows for fixed rate products are included on a contractual basis, afteradjustment for forecast prepayment activities. Cash flows for products repriced at the discretion of the Banking Group are based on the expectedrepricing 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.

The figures in the following table represent the net present value of the expected change in the Banking Group’s future earnings due to interestrate change calculated to a 97.5% percentile basis for the remaining term of all existing Banking Book assets and liabilities.

Risk associated with ASB Bank Limited's Balance Sheet is monitored daily by its Treasury and Financial Markets Division and monthly by the MarketRisk Committee. Gap analysis and gap limits provide the day-to-day management tool, while regular simulation of Banking Group activity andanalysis of expected maximum changes in market value as a percentage of capital provide key management information and limits.

Two major limits are imposed. The sensitivity to interest rate changes must be such that expected net interest earnings under different interest ratescenarios remain within a set percentage of the central forecast and, similarly, expected maximum market value changes remain within a setpercentage of capital. These limits are set by ASB Bank Limited's Board of Directors and are monitored by the Market Risk Committee. The methodsof 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, as well as the expected change in price based on the current competitive market environment.

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.

64



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


AssetsCash and Call Deposits with the Central Bank 1,111 - - - - 180 1,291Due from Other Banks 1,007 - - - - - 1,007Money Market Advances 287 - - - - - 287Securities 4,273 981 304 802 96 31 6,487Derivative Assets - - - - - 4,224 4,224Advances to Customers 33,659 8,255 9,071 7,458 13 (178) 58,278Other Assets - - - - - 1,073 1,073Total Assets 40,337 9,236 9,375 8,260 109 5,330 72,647

LiabilitiesDue to Other Banks 7,639 - - - - - 7,639Money Market Deposits 16,428 951 902 1,611 328 716 20,936Derivative Liabilities - - - - - 4,187 4,187Deposits from Customers 24,810 2,390 857 395 - 1,733 30,185Other Liabilities - - - - - 601 601Subordinated Debt 2,709 - - 570 2,570 50 5,899Total Liabilities 51,586 3,341 1,759 2,576 2,898 7,287 69,447

Lending Commitments (34) 142 54 34 2Net Derivative Notional Principals 10,936 (2,932) (6,647) (3,763) 2,406


AssetsCash and Call Deposits with the Central Bank 1,254 - - - - 158 1,412Due from Other Banks 546 128 - - - - 674Money Market Advances 3,015 322 8 5 1 - 3,351Securities 2,842 75 762 800 171 22 4,672Derivative Assets - - - - - 989 989Advances to Customers 19,469 7,372 10,776 12,501 15 (97) 50,036Other Assets - - - - - 777 777Total Assets 27,126 7,897 11,546 13,306 187 1,849 61,911

LiabilitiesDue to Other Banks 6,746 9 - - - - 6,755Money Market Deposits 15,712 1,374 310 613 26 44 18,079Derivative Liabilities - - - - - 1,340 1,340Deposits from Customers 22,036 2,243 179 156 - 1,873 26,487Other Liabilities - - - - - 828 828Subordinated Debt 2,424 - - 570 1,677 3 4,674Total Liabilities 46,918 3,626 489 1,339 1,703 4,088 58,163

Lending Commitments (89) 24 111 510 100

Net Derivative Notional Principals 22,983 (5,403) (9,185) (9,980) 1,585

The following tables include the Banking Group's assets and liabilities at their carrying amounts, categorised by the earlier of contractual repricing ormaturity dates. The carrying amounts of derivative financial instruments, which are principally used to reduce the Banking Group's exposure tointerest rate movements, are included under the heading "Non-interest Bearing".

Banking Group

65



Interest Rate Repricing Schedule (continued)




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 2,838 - - 570 1,712 9 5,129Total Liabilities 49,495 4,464 1,466 1,782 1,722 3,984 62,913

Lending Commitments (87) 77 494 234 27Net Derivative Notional Principals 19,303 (3,446) (8,517) (8,760) 1,421

Banking Group

66







AssetsCash and Call Deposits with the Central Bank 79 - - - - - 79Due from Other Banks 3,902 - - - - - 3,902Securities 390 - - - - - 390Derivative Assets - - - - - 601 601Advances to Customers 5,960 3 6 10 4 (21) 5,962Other Assets - - - - - 84 84Total Assets 10,331 3 6 10 4 664 11,018

LiabilitiesDue to Other Banks 5,283 - - - - - 5,283Money Market Deposits - - - - - - - Derivative Liabilities - - - - - 17 17Deposits from Customers 293 - - - - - 293Other Liabilities - - - - - 47 47Subordinated Debt 2,296 - - - 2,570 - 4,866Total Liabilities 7,872 - - - 2,570 64 10,506

Lending Commitments - - - - - Net Derivative Notional Principals (2,088) (3) (5) (14) 2,110


AssetsCash and Call Deposits with the Central Bank - - - - - 8 8Due from Other Banks 3,841 - - - - - 3,841Securities 307 - - - - - 307Derivative Assets - - - - - 74 74Advances to Customers 5,694 3 4 3 2 (6) 5,700Other Assets - - - - - 89 89Total Assets 9,842 3 4 3 2 165 10,019

LiabilitiesDue to Other Banks 4,191 - - - - - 4,191Derivative Liabilities - - - - - 535 535Deposits from Customers 1,015 - - - - - 1,015Other Liabilities - - - - - 44 44Subordinated Debt 2,171 - - - 1,798 - 3,969Total Liabilities 7,377 - - - 1,798 579 9,754

Lending Commitments - - - - - Net Derivative Notional Principals (1,610) - - - 1,610

Registered Bank

67







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 - - - - - 5,341Money Market Deposits - - - - - - - Derivative Liabilities - - - - - 450 450Deposits from Customers 846 5 - - - - 851Other Liabilities - - - - - 78 78Subordinated Debt 2,424 - - - 1,712 - 4,136Total Liabilities 8,611 5 - - 1,712 528 10,856

Lending Commitments - - - - - Net Derivative Notional Principals (665) - (3) (3) 671

Registered Bank

68



>>>

As at 31-Dec-08 31-Dec-07 30-Jun-08$ millions

CORE LIQUID ASSETSQualifying Liquid AssetsCash 185 161 65 Balances with the Central Bank 1,106 1,251 1,090 Treasury Bills 1,682 354 738 Government Bonds 357 39 64 Bank Bills Prime 2,010 1,729 1,800 Other Qualifying Liquid Assets 2,624 2,635 2,613 Total Qualifying Liquid Assets 7,964 6,169 6,370

Retail Mortgage Backed Securities 5,100 - -

Total Core Liquid Assets 13,064 6,169 6,370

Total Qualifying Liquid Assets Expressed as a Percentage of Total General Liabilities 13.55% 12.02% 11.44%

During the period ended 31 December 2008 ASB Bank Limited established an in-house residential mortgage-backed securities ("RMBS") facility,which can issue securities that can be used as collateral for borrowing from the RBNZ. As at 31 December 2008 ASB Bank Limited had internallysecuritised $5.4bn of unrated RMBS through the Medallion NZ Series Trust 2008-1U, of which $5.1bn is eligible for acceptance by the RBNZ.Whilst not intended to be used for day to day liquidity management, the RMBS form part of the Banking Group's Total Core Liquid Assets.

Liquidity Risk

The table below shows the key liquidity measures as at the end of the period.

Run-Off Risk is calculated based on estimates of investor behaviour in a crisis scenario. Funding is weighted to reflect the sensitivity of differentclasses 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 groupsfalling to 5% for some retail funds. Additional liquid asset requirements are added to allow for undrawn commitments to lend based upon thelikelihood of drawdown.

ASB Bank Limited and the Registered Bank monitor liquidity risk primarily by forecasting future daily cash requirements. To provide for anyunexpected patterns in cash movements, ASB Bank Limited and the Registered Bank hold a pool of readily tradable investment assets anddeposits 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 offshorefunding, 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 andcommitments, 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 :

Qualifying liquid assets are of high credit quality and include short term cash held with the RBNZ or other banks, government securities and othersecurities that are readily acceptable in Repurchase agreements with the RBNZ and other New Zealand banks, prime corporate bonds and shortterm 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 key liquidity measures are described below:

69



Within Between Between Between OverAt 6 6-12 1-2 2-5 5 Carrying

$ millions Call Months Months Years Years Years Total Value


Financial AssetsCash and Call Deposits with the Central Bank 1,291 - - - - - 1,291 1,291Due from Other Banks 418 589 - - - - 1,007 1,007Money Market Advances 201 85 - - - - 286 287Securities - 4,032 383 1,077 949 657 7,098 6,487Derivative Assets - 3,671 56 114 258 2,980 7,079 4,224Advances to Customers 2,017 15,346 2,214 5,537 11,462 59,043 95,619 58,278Other Assets - - 99 - - - 99 353Total Financial Assets 3,927 23,723 2,752 6,728 12,669 62,680 112,479 71,927

Financial LiabilitiesDue to Other Banks 646 4,886 559 943 381 762 8,177 7,639Money Market Deposits 2,222 11,964 2,575 1,161 2,770 307 20,999 20,936Derivative Liabilities - 2,339 19 68 197 951 3,574 4,187Deposits from Customers 12,447 13,940 2,755 906 411 - 30,459 30,185Other Liabilities - - 178 - - - 178 601Subordinated Debt - 240 79 316 664 9,091 10,390 5,899Total Financial Liabilities 15,315 33,369 6,165 3,394 4,423 11,111 73,777 69,447


Financial AssetsCash and Call Deposits with the Central Bank 1,412 - - - - - 1,412 1,412Due from Other Banks 63 491 130 - - - 684 674Money Market Advances 80 2,978 327 9 9 - 3,403 3,351Securities - 2,761 122 957 860 594 5,294 4,672Derivative Assets - 165 7 5 18 43 238 989Advances to Customers 2,052 9,200 1,986 5,274 9,558 59,073 87,143 50,036Other Assets - 58 2 - - - 60 302Total Financial Assets 3,607 15,653 2,574 6,245 10,445 59,710 98,234 61,436

Financial LiabilitiesDue to Other Banks 600 4,414 1,352 24 44 630 7,064 6,755Money Market Deposits 2,724 12,073 1,447 406 1,632 33 18,315 18,079Derivative Liabilities - 572 19 14 - 521 1,126 1,340Deposits from Customers 10,215 13,251 2,897 197 163 - 26,723 26,487Other Liabilities - 98 59 - - - 157 490Subordinated Debt - 76 129 339 457 8,918 9,919 4,674Total Financial Liabilities 13,539 30,484 5,903 980 2,296 10,102 63,304 57,825

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.

70






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 - 87 245 333 499 9,588 10,752 5,129Total Financial Liabilities 13,488 30,043 6,999 2,966 5,285 10,500 69,281 62,718

Maturity Analysis for Undiscounted Contractual Cash flows (continued)

Banking Group

71






Financial AssetsCash and Call Deposits with the Central Bank 79 - - - - - 79 79Due from Other Banks 55 1,420 38 490 193 2,596 4,792 3,902Securities - 390 - - - - 390 390Derivative Assets - 897 - - - 2,605 3,502 601Advances to Customers 451 5,144 5 8 15 1 5,624 5,962Other Assets - - 6 - - - 6 77Total Financial Assets 585 7,851 49 498 208 5,202 14,393 11,011

Financial LiabilitiesDue to Other Banks - 4,969 5 21 32 451 5,478 5,283Derivative Liabilities - 8 - - - 950 958 17Deposits from Customers 124 170 - - - - 294 293Other Liabilities - 2 - - - - 2 44Subordinated Debt - 63 63 253 379 8,229 8,987 4,866Total Financial Liabilities 124 5,212 68 274 411 9,630 15,719 10,503


Financial AssetsCash and Call Deposits with the Central Bank 8 - - - - - 8 8Due from Other Banks 98 140 427 1,450 280 2,883 5,278 3,841Securities - 307 - - - - 307 307Derivative Assets - 14 - - - - 14 74Advances to Customers 533 5,226 5 5 4 2 5,775 5,700Other Assets - - - - - - - 79Total Financial Assets 639 5,687 432 1,455 284 2,885 11,382 10,009

Financial LiabilitiesDue to Other Banks - 3,873 8 31 46 510 4,468 4,191Derivative Liabilities - 10 - 8 - 513 531 535Deposits from Customers 106 917 - - - - 1,023 1,015Other Liabilities - - 2 - - - 2 44Subordinated Debt - 61 61 242 478 7,773 8,615 3,969Total Financial Liabilities 106 4,861 71 281 524 8,796 14,639 9,754

Registered Bank


72






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

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Deposits at Other Total Deposits at Other Total$ millions Fair Value Funding Funding Fair Value Funding Funding


Agricultural, Forestry and Fishing 63 744 807 - - - Government and Public Authorities 305 327 632 - 1 1Financial, Investments and Insurance 13,510 22,374 35,884 - 10,205 10,205Utilities 75 233 308 - 9 9Transport and Storage 25 105 130 - 23 23Personal 1,443 22,820 24,263 - - - Other Commercial and Industrial 508 2,127 2,635 - 204 204Total Funding by Industry 15,929 48,730 64,659 - 10,442 10,442

New Zealand 4,776 25,452 30,228 - 406 406Overseas 11,153 23,278 34,431 - 10,036 10,036Total Funding by Geographic Region 15,929 48,730 64,659 - 10,442 10,442


Agricultural, Forestry and Fishing 45 434 479 - - - Government and Public Authorities 375 262 637 - - - Financial, Investments and Insurance 13,493 17,696 31,189 - 8,892 8,892Utilities 54 88 142 - 53 53Transport and Storage 20 51 71 - 1 1Personal 1,396 19,620 21,016 - - - Other Commercial and Industrial 570 1,891 2,461 - 229 229Total Funding by Industry 15,953 40,042 55,995 - 9,175 9,175

New Zealand 6,048 24,932 30,980 - 2,120 2,120Overseas 9,905 15,110 25,015 - 7,055 7,055Total Funding by Geographic Region 15,953 40,042 55,995 - 9,175 9,175




Concentrations of Funding

The following tables present the Banking Group's Concentrations of Funding which are reported by industry and geographic region. Total Fundingcomprises 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.



74



Deposits at Other Total Deposits at Other TotalFair Value Funding Funding Fair Value Funding Funding


Agricultural, Forestry and Fishing 40 760 800 - - - Government and Public Authorities 368 301 669 - - - Financial, Investments and Insurance 14,417 20,008 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 16,849 43,941 60,790 - 10,328 10,328

New Zealand 6,964 25,520 32,484 - 224 224Overseas 9,885 18,421 28,306 - 10,104 10,104Total Funding by Geographic Region 16,849 43,941 60,790 - 10,328 10,328



Concentrations of Funding (continued)


75



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


US Dollar 0.5787 1,544 9,264 - 324 2,513 - Australian Dollar 0.8362 124 4,830 - 43 2,358 - Sterling 0.4011 6 956 - - - - Japanese Yen 52.2956 15 1,195 (2) - - - EURO 0.4112 697 2,739 (1) 71 71 - Canadian Dollar 0.7051 63 66 - - - - Swiss Franc 0.6129 1 1,506 (2) - - -


US Dollar 0.7764 1,130 8,031 13 279 1,905 - Australian Dollar 0.8824 283 4,846 2 233 2,427 - Sterling 0.3887 7 1,387 (10) - - - Japanese Yen 87.1873 460 780 (214) 2 2 - EURO 0.5270 801 2,910 - 61 61 - Swiss Franc 0.8736 2 1,347 - - - -


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

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 typetraded in the market.

The material assets and liabilities denominated in foreign currencies recognised in these financial statements, and Net Open Positions are presentedin the tables below:

ASB Bank Limited monitors and manages this risk through its Treasury and Financial Markets Division. Mismatches, and the contingent riskassociated with any mismatch, are reported daily. Limits, both intra-day and overnight, are set on the basis of past exchange rate volatility to ensurethat 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 within ASB Bank Limited and the Registered Bank separately.

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 andlending activity in foreign currencies and from offshore funding by the Banking Group.

Equity risk results from the repricing of equity investments held by the Banking Group. This is not a material risk to the Banking Group. A formalequity risk policy approved by the Board Risk Committee of ASB Bank Limited is in place, under which trading in equities is not permitted. TheRegistered 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 arecontrolled within internal policy limits.


76



Derivatives

Details of derivatives are shown in Note 14.

Business Continuity Management

Internal Audit

46 Events after the Balance Sheet Date

Operational and Strategic Business Risk

Derivative instruments are contracts whose value is derived from one or more underlying financial instruments or indices defined in the contract. TheBanking Group enters into derivative transactions including swaps, forward rate agreements, futures, options 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 Banking Group's financialmarkets activities. Derivatives are used to manage exposure to market risk.

The Board Audit Committee of ASB Bank Limited meets on a regular basis to consider ASB Bank Limited's financial reporting, internal control andcorporate governance issues. It reviews the interim and annual financial statements, the activities of the internal and external auditors and monitorsthe relationship between management and the external auditors.

The respective business managers of ASB Bank Limited and CBA are responsible for the identification and assessment of these risks and formaintaining appropriate internal controls, and is supported by the Banking Group's governance structures, operational risk frameworks andoperational risk policies.

The operational risk measurement methodology combines expert assessment of individual risk exposures with internal loss data to determine potentialosses 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 todefined 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 operationalrisks that could have a significant impact on the Banking Group's critical processes and revenue streams. It includes both cost-effective responses tomitigate 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 ManagingDirector and the Board Audit Committee.

There are no other events subsequent to the balance date which would materially affect the financial statements.

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 asimilar 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 processeswithin ASB Bank Limited's operations. Operational, compliance and systems audits of all areas of ASB Bank Limited's operations are undertakenbased on an assessment of risk.

A comprehensive BCM programme including plan development, testing and education has been implemented across all business units.

Refer to Note 33 for details of Perpetual Preference Dividends payable to Minority Interests, declared after the balance sheet date.

On 23 February 2009 ASB Capital Limited and ASB Capital No. 2 Limited elected to become Portfolio Investment Entities.

77

GENERAL DISCLOSURE STATEMENT

31 December 2008For the six months 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 - 17 1 Statement of Accounting Policies18 - 19 1A Discontinued Operations20 - 21 2 Actuarial Policies and Methods

22 3 Net Profit After Taxation22 4 Premium Income22 5 Reinsurance23 6 Investment Income23 7 Other Income24 8 Claims, Surrenders and Maturities

24 - 25 9 Commission and Management Expenses25 10 Auditor's Remuneration26 11 Taxation

26 - 27 12 Imputation and Policyholder Credit Accounts 28 13 Securities 28 14 Cash and Cash Equivalents

29 - 30 15 Derivative Financial Instruments30 16 Investments in Subsidiaries31 17 Property, Plant and Equipment

32 - 33 18 Intangible Assets33 19 Trade and Other Receivables

33 - 34 20 Other Assets35 21 Life Insurance Contract Liabilities and Life Investment Contracts36 22 Reinsurance Assets and Liabilities36 23 Deferred Taxation Liability37 24 Borrowings37 25 Trade and Other Payables

37 - 38 26 Provisions38 27 Contributed Capital - Ordinary Shareholder38 28 Contributed Capital - Convertible Notes38 29 Retained Earnings 38 30 Head Office Contribution

38 - 39 31 Capital Management40 - 41 32 Related Party Transactions and Balances

41 33 Directors and Key Management Personnel41 34 Leasing Commitments41 35 Contingent Liabilities and Capital Commitments

42 - 43 36 Financial Reporting by Segments43 37 Interest Rate Summary43 38 Fair Value of Financial Instruments not Carried at Fair Value44 39 Asset Quality45 40 Provisions for Impairment Loss45 41 Disaggregated Information

46 - 48 42 Risk Management Policies49 43 Events After Balance Date

49 - 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 Counterparties

54 - 55 Auditor's Report

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

Mr C.J.S. Pink replaced Mr G.H. Burrett as Responsible Person authorised by the Directors to sign the General Disclosure Statement inaccordance with section 62 of the Reserve Bank of New Zealand Act with effect from 1 January 2009.

The Life Group has not published a supplementary disclosure statement because none of the information required to be disclosed appliesto the Life Group.

The Overseas Bank is the Commonwealth Bank of Australia, domiciled in Australia. The Overseas Banking Group is the CommonwealthBank 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 sharecapital 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 generalinsurance. The origins of the Bank lie in the former Commonwealth Bank of Australia which was established in 1911 by an Act ofParliament to conduct commercial and savings bank functions. These functions were gradually expanded under continued Governmentownership until September 1991 when the Bank was partially privatised. In July 1996 the Commonwealth Government sold its remainingshareholding 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 theCommonwealth Bank of Australia New Zealand Operations (the "CBA NZ Operations") as at 31 December 2008. This information is publishedwhere 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 General Disclosure Statement for Commonwealth Bank of Australia New Zealand BankingGroup (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'swebsite (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 Nil

4.2 Directors of the Commonwealth Bank of Australia

EXECUTIVE DIRECTOR

Name 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 Compa

Starlight Foundation, Allens Arthur Robinson Limited, Clayton Utz, National Australia DCouncil, National Library of Australia

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, New Zealand External Directorships Florey Neuroscience Institutes

Cricket, International Cricket Council, Asia Society AustralAsia Centre, HowardCapital Coast District Health Board, Florey Institute Foundation, Financial SerNew Zealand Venture Investment Fund, Volunteer Corps, Asia SocietyNew Zealand Meat Industry Taskforce

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 Brambles Limited, Cobham plc External Directorship AMP Foundation

4.3 Responsible PersonIn Absence

C.J.S. (Charles) Pink S.B. (Stewart) McRobieManaging Director and Chief Executive Officer Head of Group Finance and Risk ManagementAuckland, New Zealand Auckland, New Zealand

5.0

6.0 Capital Adequacy - Overseas Bank and Overseas Banking Group

Information concerning the Overseas Bank and Overseas Banking Group can be obtained from Part A Commonwealth Bank of AustraliaNew Zealand Banking Group (the “Banking Group”) General Disclosure Statement, Note 42 Capital Adequacy of Overseas Bank on page61.

Conditions of Registration - Commonwealth Bank of Australia New Zealand Branch (the "Registered Bank") as from 26November 2007.

The Conditions of Registration are outlined in Part A Commonwealth Bank of Australia New Zealand Banking Group (the “BankingGroup”) General Disclosure Statement, General Matters 6.0.

2

7.0 Credit Ratings of Commonwealth Bank of Australia

7.1

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

As at the date of the signing of this General Disclosure Statement, the following rating was assigned to Sovereign Assurance CompanyLimited's ability to meet its ongoing obligations to policyholders:

D

The A.M. Best Financial Strength rating was upgraded on 28 December 2007.


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 ratingcategories.

AA

The Moody's rating was raised from Aa3 to Aa1 on 4 May 2007. The Standard and Poor's rating was raised from AA- to AA on 21 February2007. The Fitch rating was assigned as AA and has remained unchanged since 1999.


AA

Aa1

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

3

Historical Summary of Aggregated Financial Statements


Unaudited Audited Audited Audited Audited AuditedFor the period ended 31-Dec-08 30-Jun-08 30-Jun-07 30-Jun-06 30-Jun-05 30-Jun-04$ millions 6 months 12 months 12 months 12 months 12 months 12 months

INCOME STATEMENT (1)

Premium Income 252 448 411 374 325 296

Reinsurance Income 34 62 62 62 57 77

Investment Income (131) (22) 280 440 325 280

Net Interest Income from Securitised Mortgages - - - - - 2

Revaluation of Borrowings and Swaps (78) 25 1 74 37 25

Other Income 16 77 80 13 16 21

Total Operating Income 93 590 834 963 760 701

Impairment (Recoveries) / Losses on Advances - - - (3) 1 (2)

Total Operating Income After Impairment Losses 93 590 834 966 759 703

Reinsurance Expenses 43 72 67 66 85 96

Claims, Surrenders and Maturities 163 299 303 265 160 172

Net Change in Policy Liabilities - - - - 138 124

Net Change in Life Insurance Contract Liabilities (165) (168) (20) 52 - -

Net Change in Life Investment Contract Liabilities (106) (104) 37 109 - -

Commission and Management Expenses 139 314 268 270 232 -

Finance Costs 19 48 46 44 53 -

Other Operating Expenses 2 4 3 3 2 291

Total Operating Expenses 95 465 704 809 670 683

Net (Loss) / Profit Before Taxation (2) 125 130 157 89 20

Taxation (Credit) / Expense (3) 22 34 62 39 8

Net Profit After Taxation from Continued Operations 1 103 96 95 50 12

Gain on Disposal of Discontinued Operations 48 - - - - -

Net Profit After Taxation 49 103 96 95 50 12

Dividends and Branch Profit Repatriated 9 19 22 93 37 9

Profit Retained 40 84 74 2 13 3

Of which Impaired Asset (Recovery) / Expense - - - (3) 3 (2)


$ millions Unaudited Audited Audited Audited Audited AuditedAs at 31-Dec-08 30-Jun-08 30-Jun-07 30-Jun-06 30-Jun-05 30-Jun-04

BALANCE SHEET (1)

Total Assets 3,286 3,566 3,804 3,761 3,460 3,459

Of which Impaired Assets 1 1 1 1 1 4


Shareholder's Equity 958 918 839 399 314 312

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 and the Notes to the Financial Statements include the results of the entities sold on 1 July 2008 (the "Discontinued Operations").

5

Income Statement

Unaudited Unaudited AuditedFor the period ended Note 31-Dec-08 31-Dec-07 30-Jun-08$ millions 6 months 6 months 12 months

Continuing Operations: (1)

Premium Income 4 252 223 448

Reinsurance Income 5 34 30 62

Investment Income 1A, 6 (131) 69 (23)

Revaluation of Borrowings and Swaps 1A, 7 (78) 11 25

Other Income 1A, 7 16 17 31

Total Operating Income 93 350 543

Total Operating Expenses 95 278 402

Reinsurance Expenses 5 43 37 72

Claims, Surrenders and Maturities 8 163 157 299

Other Operating Expenses 2 1 4

Net Change in Life Insurance Contract Liabilities 21 (165) (44) (168)

Net Change in Life Investment Contract Liabilities 21 (106) (20) (104)

Commission and Management Expenses 1A, 9 139 124 251

Finance Costs 19 23 48

Net (Loss) / Profit Before Taxation 1A (2) 72 141

Taxation (Credit) / Expense 1A, 11 (3) 21 27

Net Profit After Taxation Attributed to Parent Company Shareholders from Continuing Operations 1A 1 51 114

Discontinued Operations: (1)

Net Loss after Taxation of Discontinued Operations - - (11)

Gain on Disposal of Discontinued Operations 1A 48 - -

Net Profit After Taxation Attributed to Parent Company Shareholders 1A, 3 49 51 103

Statement of Recognised Income and Expense

Net Profit After Taxation Attributed to Parent Company Shareholders 1A, 3 49 51 103

Total Recognised Income and Expense 49 51 103


Life Group

(1) On 1 July 2008, ASB Group Investments Limited, Aegis Limited, Investment Custodial Services Limited and Jacques Martin New Zealand Limited were soldby the Life Group to the Banking Group. When an operation is classified as a Discontinued Operation the current and comparative Income Statements arerestated. Please refer Discontinued Operations (Note 1A) to reconcile the Income Statement and Balance Sheet figures to the Notes to the Financial Statements.

6

Balance Sheet

$ millions Unaudited Unaudited AuditedAs at Note 31-Dec-08 31-Dec-07 30-Jun-08

ASSETS (1)

Financial Assets

- Cash and Cash Equivalents 1A, 14 584 587 559

- Securities 13 1,796 2,295 2,113

- Derivative Financial Instruments 15 69 32 74

- Trade and Other Receivables 1A, 19 57 69 66

Reinsured Life Insurance Contracts 22 63 60 60

Current Taxation Asset 1A 90 19 65

Property, Plant and Equipment 17 36 39 39

Intangible Assets 18 566 572 564

Other Assets 20 25 28 26

3,286 3,701 3,566

Assets of Discontinued Operations Held for Sale (1) - - 18

Total Assets 3,286 3,701 3,584

Total Interest Earning and Discount Bearing Assets 1,558 1,483 1,431

Financed by:

LIABILITIES (1)

Life Insurance Contract Liabilities 21 583 873 746

Financial Liabilities

- Life Investment Contracts 21 1,009 1,316 1,186

- Borrowings 24 366 378 407

- Derivative Financial Instruments 15 88 6 25

- Deposited Reserves 22 40 42 40

- Trade and Other Payables 1A, 25 114 129 145

Deferred Taxation Liability 1A, 23 128 74 108

Provisions 1A, 26 - 2 1

2,328 2,820 2,658

Liabilities of Discontinued Operations Held for Sale (1) 1A - - 8

Total Liabilities 2,328 2,820 2,666

SHAREHOLDER'S EQUITY

Contributed Capital - Ordinary Shareholder 27 - 5 -

Contributed Capital - Convertible Notes 28 503 503 503

Retained Earnings 29 155 73 115

Head Office Contribution 30 300 300 300

Total Shareholder's Equity 958 881 918

Total Liabilities and Shareholder's Equity 3,286 3,701 3,584

Total Interest and Discount Bearing Liabilities 406 420 447

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 for thisperiod has been restated. Please refer to Discontinued Operations (Note 1A) to reconcile the Income Statement and Balance Sheet figures to the Notes to theFinancial Statements.

7

Cash Flow Statement

$ millions Unaudited Unaudited AuditedFor the period ended 31-Dec-08 31-Dec-07 30-Jun-08


CASH FLOWS FROM OPERATING ACTIVITIESCash was provided from:

Premium Receipts 287 276 552 Dividend Receipts 14 17 31 Forward Foreign Exchange Contract Gains - 5 - Interest Receipts 45 47 99 Mortgage Interest Receipts - - 1 Sundry Fees and Commission Receipts 19 50 104

365 395 787

Cash was applied to:Forward Foreign Exchange Contract Losses 262 - 11 Claims, Surrenders and Maturities Payments 276 260 497 Net Reinsurance Payments 1 7 17 Commission Payments 71 58 122 Payments to Suppliers and Employees 80 102 194 Interest on Loan Facilities 23 23 47 Net Tax Payments to Related Parties - 13 22 Net Tax Payments - 1 6

713 464 916

Net Cash Flows from Operating Activities (348) (69) (129)

CASH FLOWS FROM INVESTING ACTIVITIESCash was provided from:

Proceeds from Sale of Subsidiaries 58 - - Proceeds from Sale of Securities 1,407 1,103 2,636

1,465 1,103 2,636

Cash was applied to:Purchase of Investments - 2 2 Purchase of Securities 1,057 957 2,414 Purchase and Development of Property, Plant and Equipment 3 13 17

1,060 972 2,433

Net Cash Flows from Investing Activities 405 131 203

Cash was applied to: Dividends and Branch Profit Repatriated 23 13 28

Repayment of Borrowings 5 - - Convertible Notes Repaid 3 13 27

31 26 55

Net Cash Flows from Financing Activities (31) (26) (55)


Life Group

8

Cash Flow Statement (continued)

$ millions Unaudited Unaudited AuditedFor the period ended Note 31-Dec-08 31-Dec-07 30-Jun-08


SUMMARY OF MOVEMENTS IN CASH FLOWSNet Increase in Cash and Cash Equivalents 26 36 19 Add: Cash and Cash Equivalents at Beginning of Period 570 551 551 Less: Cash of Discontinued Operations 12 - -

Cash and Cash Equivalents at End of Period 1A, 14 584 587 570

RECONCILIATION OF NET PROFIT AFTER TAXATIONTO NET CASH FLOWS FROM OPERATING ACTIVITIES

Net Profit After Taxation 49 51 103

Add: Non-Cash Items and Items Classified as Investing and Financing ActivitiesImpairment of Leasehold Improvements - - (1)Depreciation and Amortisation 4 3 6 Net Realised and Unrealised - (Gains) / Losses (37) 4 135 Non-Cash Dividends (Paid) / Received (6) (16) 9 Gains on Disposal of Property, Plant and Equipment - - (17)Tax on Dividends and Repatriation of Profits 7 4 16 Movement in Income Tax Assets and Liabilities (8) 2 (26)Deferred Acquisition Cost Amortisation 1 1 3 Net Change in Life Insurance Contract Liabilities recognised in Income Statement - Decrease (165) (44) (168)Net Change in Life Investment Contract Liabilities recognised in Income Statement - Decrease (106) (20) (104)

(310) (66) (147)

Add: Movements in Balance Sheet ItemsTrade Receivables and Sundry Debtors - Increase / (Decrease) 4 (1) (3)Provisions - (Decrease) / Increase (1) - 2 Deferred Fee Balance - (Decrease) / Increase (1) 1 (1)Trade and Expense Creditors - (Decrease) / Increase (18) (1) 22 Life Investment Contract Liabilities - Savings Premium, Claims, Maturities & Surrenders (Net) (71) (43) (90)Life Insurance Contract Liabilities - Deposit Premium, Claims, Maturities & Surrenders (Net) - (10) (15)

(87) (54) (85)

Net Cash Flows from Operating Activities (348) (69) (129)

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 Period

Goodwill on Acquisition

Where 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 SocietyLimited - New Zealand Branch ("CMLA"), Colonial First State Investments (NZ) Limited ("CFSI") and its subsidiaries, Colonial First StateInvestment Managers (NZ) Limited ("CFSIM") and Colonial Holding Company Limited - New Zealand Branch ("CHC"). The basis of aggregationis an addition of the Life Group entities' individual financial statements. All translations and balances between entities with the Life Group havebeen eliminated.

The Life Group's aggregated financial statements have been prepared in accordance with New Zealand Generally Accepted AccountingPractice ("NZ GAAP"). They comply with International Financial Reporting Standards. They also comply with the New Zealand equivalents toInternational Financial Reporting Standards ("NZ IFRS"), and other applicable Financial Reporting Standards, as appropriate for profit-orientedentities.

The following new standards and amendments to standards relevant to the Life Group are not yet effective and have not yet been applied inpreparing the financial statements. Adoption of these standards will not have any impact on the Life Group's reported profit or financial position.

NZ IFRS 8 Operating Segments will apply to the Life Group from 1 July 2009 and will affect the financial and descriptive informationdisclosed about the Life Group's reportable segments, but will not have any impact on its reported profits or financial position.

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, Life Investment Contracts (refer to note 2), Goodwill (refer tonote 18) and Tax provisions all require estimates to be made. Actual results could differ from these estimates, although other than for thecomputation of tax provisions, it is not anticipated that such differences would be material. Uncertainties exist with respect to the interpretationof complex tax regulations for life insurance activities. Given the complexity of life insurance tax legislation and the assumptions involved,adjustments to income tax expense in future periods may be required. Further information on income taxes is given in Note 35.

NZ IFRS 3 Business Combinations (revised) will apply to the Life Group from 1 July 2009 and will result in additional disclosures in the event of a business combination.

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 Financial Reporting Act 1993 and the Companies Act 1993 and to theextent it is applicable to the Life Group the Registered Bank Disclosure Statement (Full and Half Year Overseas Incorporated RegisteredBanks) Order 2008. They were approved for issue by the Directors on 18 March 2009.

Goodwill arising on the acquisition of an entity represents the excess of purchase consideration over the fair value of identifiable netassets acquired.

The carrying value of Goodwill is tested annually for impairment, or more frequently if events or changes in circumstances indicate that itmight be impaired. If any such indication exists, the asset's recoverable amount is estimated, and an impairment loss is recognised underOperating Expenses in the Income Statement for the difference between the carrying amount and the recoverable amount. Impairmentlosses on goodwill are not reversed. For the purposes of impairment testing, Goodwill is allocated to cash generating units or groups ofunits. A cash generating unit is the smallest identifiable group of assets that generate independent cash flows. Goodwill is allocated bythe Life Group to cash generating units or groups of units based on how Goodwill is monitored by management. Gains and losses on thedisposal of an entity include the carrying value of the goodwill relating to the entity sold.

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 IAS 1 Presentation of Financial Statements (revised) will apply to the Life Group from 1 July 2009 and will result in changes to thedisclosure of changes in Equity.

A Glossary of Terms included with the Statement of Accounting Policies is set out on page 19.

There have been no material changes to accounting policies in the period ended 31 December 2008. 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, to govern the financial andoperating policies of entities so as to obtain benefit from its activities. The financial statements of subsidiaries are included in the LifeGroup’s financial statements using the purchase method of consolidation. All intra-group balances and transactions have been eliminatedin preparing the consolidated financial statements.

10



(b) Foreign Currency Translation

(c) Revenue 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 interest basis.

(d) Expense Recognition

Claims, Surrenders and Maturities

Other Expenses

Commission and Management Expenses

Acquisition Costs

Acquisition Costs - Life Insurance Contracts

Revenue is recognised to the extent that it is probable that economic benefits will flow to the Life Group, and that the revenue and thestage of completion of the transaction can be reliably measured. The principal sources of revenue are Premium Income and InvestmentIncome.

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 therevaluations 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 atthe exchange rate ruling at the dates that the values were determined. Foreign currency exchange differences relating to investments atFair 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.

Goodwill is included on the basis of its deemed cost less impairment which represents the amount recorded under previous NZ GAAP.On transition to NZ IFRS the classification and accounting treatment of business combinations that occurred prior to 30 June 2004 werenot reconsidered in preparing the Life Group's opening NZ IFRS Balance Sheet at 1 July 2004.

The assets and liabilities of the personal superannuation business, for which various Life Group companies act as a trustee, are notincluded in the Life Group financial statements.

Life Group Companies Acting as Trustee

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.

Initial entry fee income on investment contracts is recognised as revenue at the outset of the contract only if a specific initial service (forwhich the fee relates) is provided by the Life Group at that time. Otherwise initial entry fee income is deferred as a component of the LifeInvestment 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 portionrecognised as an increase in Life Investment Contract Liabilities.

Acquisition costs are the fixed and variable costs of acquiring new business including commissions and similar distribution costs, andcosts of accepting, issuing and initially recording policies. They do not include general growth and development costs incurred by the LifeGroup 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, salaries and relatedcosts, depreciation, interest and other management costs. These are recognised in the Income Statement as follows:

Commission and management expenses are apportioned between life insurance and life investment contracts and then categorised intoacquisition, investment management or maintenance costs on the basis of a detailed functional analysis of activities carried out by theLife Group.

Interest income is recognised in the Income Statement as it accrues. Dividend income and unit trust distributions are recognised in theIncome Statement when the Life Group's right to receive this is established. Realised and unrealised gains and losses from fair valueremeasurement 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 investmentcontracts represent withdrawals of investment deposits and are recognised as a reduction in Life Investment Contract Liabilities.

11



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

Reinsured Life Investment Contracts

AVAILABLE FOR SALE FINANCIAL ASSETS

Available for Sale Financial Assets are measured at fair value, with changes in fair value recognised directly in Shareholder's Equity. TheLife Group has not classified any financial assets in this category.

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 Notes 28 and 29 fordetails 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.

Refer to (n) for details on Reinsured Life Investment Contracts.

Investments held by life insurance companies are stated at fair value. The financial assets in this category have been designated atinception as Fair Value through Profit or Loss because they back life insurance liabilities or investment contract liabilities except for theannuity investment (refer below). Purchases and sales of these securities are recorded on a trade date basis. Gains and losses arisingfrom 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 fundmanager.

Mortgages and loans on policies are recognised at fair value based on a market accepted valuation technique, usingmethods 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 aninterest rate swap derivative. Purchase and sale of this security is recorded on a trade date basis. Gains and losses arising from the fairvalue remeasurement are included as part of Investment Income in the Income Statement. The annuity investment is recognised at fairvalue based on a market accepted valuation technique, using methods, rates and assumptions that are based on market conditions andrisks existing at the balance date.

The Life Group classifies financial instruments into one of the following categories at initial recognition: Financial Assets at Fair Valuethrough Profit or Loss, Available for Sale Financial Assets, Loans and Receivables, Held to Maturity, Financial Liabilities at Fair Valuethrough Profit or Loss and Other Financial Liabilities.

Some of these categories require measurement at fair value. Where available, quoted market prices are used as a measure of fairvalue. Where quoted market prices do not exist, fair values are estimated using present value or other market accepted valuationtechniques, 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 isobjective evidence of impairment. If any such evidence exists, the asset's recoverable amount is calculated using the present value offuture estimated cash flows discounted at the original effective interest rate. An impairment loss is recognised in the Income Statementfor the difference between the carrying amount and the recoverable amount. An impairment loss is reversed if the subsequent increase inthe recoverable amount can be related objectively to an event occurring after the impairment loss was recognised. The impairment loss isreversed only to the extent that the financial asset's carrying amount does not exceed the carrying amount that would have beendetermined if no impairment loss had been recognised.

Maintenance costs are the fixed and variable costs of administering policies subsequent to sale. These include general growth anddevelopment 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 investmentmanagement 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 otheracquisition costs are recognised as expenses in the Income Statement when incurred. The deferred acquisition cost asset issubsequently amortised over the life of the contracts and recognised in the Income Statement. Unamortised acquisition costs arerecorded in Other Assets.

12



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 on 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 Financial Instruments qualifying for Hedge Accounting

Fair Value Hedge Accounting

Trade and Other Payables include dividends payable, interest payable, trade creditors and accruals, deferred fees, and amounts due torelated parties. These items are recognised when due and measured on initial recognition at the fair value of consideration received lesstransaction 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 inthis 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 recognitionthe borrowings are measured at amortised cost on an effective interest rate basis.

Assets in this category are recognised initially at fair value plus transaction costs and subsequently measured at amortised cost less anyallowance 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 havebeen transferred, or the Banking Group has transferred substantially all the risks and rewards of ownership. In transactions wheresubstantially all the risk and rewards are neither retained nor transferred, the Banking Group derecognises assets when control is no longerretained, or when control is retained the assets are recognised to the extent of the Banking 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 amountsof 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 tothe Income Statement when earned.

Trade and Other Receivables include securities sold but not delivered, income receivable, amounts due from related parties, amounts duefrom agents and other trade debtors.

Refer to (n) for details on reinsurance Deposited Reserves.

Liabilities in this category are measured at fair value. Gains and losses arising from the fair value remeasurement of Financial Liabilities atFair Value through Profit or Loss are included in the Income Statement. Financial Liabilities included within Financial Liabilities at Fair Valuethrough the Profit or Loss include:

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

A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expired.

Forward exchange contracts are used to reduce the Life Group's exposure to foreign exchange movements affecting the market value ofthe Life Group's investments denominated in foreign currencies. Derivatives, including cross currency and interest rate swaps, are used tomitigate 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 havea positive fair value. Derivative Liabilities are the fair value of derivatives which have a negative fair value. Derivatives are recorded at fairvalue based on market accepted valuation techniques.

For qualifying fair value hedges the change in fair value of the hedging derivative is recognised in the Income Statement. Changes in fairvalue of the hedged item which relate to the risks hedged by the hedging derivative are reflected as an adjustment to the carrying value ofthe hedged item. This movement is also recognised in the Income Statement as other income.

The Life Group uses derivatives as part of its asset and liability management activities to manage exposures to interest rate and foreigncurrency risks. The Life Group applies fair value hedge accounting when transactions meet the hedge accounting criteria in NZ IAS 39. TheLife Group documents at the inception of the transaction the relationship between the hedging instruments and hedged items. The LifeGroup assesses (both at inception and on an ongoing basis), whether the derivatives are expected to be, and have been, highly effective inoffsetting changes in fair values of hedged items.

All derivatives that do not meet the criteria for hedge accounting under NZ IAS 39 Financial Instruments: Recognition and Measurementare classified as Held for Trading. This includes derivatives transacted to mitigate foreign currency and interest rate risk. Changes in fairvalue are reflected in the Income Statement as other income immediately when they occur.

13



(h) Investments in Subsidiaries

(i) Offsetting Financial Instruments

(j) Property, Plant and Equipment

Leasehold Improvements and Services 5 - 18 yearsOffice Equipment, Furniture and Fittings 3 - 5 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. Theseassets are amortised using the straight-line method over their useful lives, estimated as 10 years and 30 months respectively.

Life insurers are subject to a special tax regime. Two tax bases are maintained; the life office base which is subject to tax on investmentincome less expenses plus underwriting income, and the policyholder base which seeks to tax benefits as they accrue to policyholdersunder the policies. The life insurer pays tax on the higher of the two bases at the company tax rate of 33% (30% from 1 July 2008). The lifeinsurer is able to use accumulated imputation credits generated in the life office base to meet any tax liability arising in the policyholderbase. As the life insurer is taxed as proxy for the policyholder, returns to policyholders are tax exempt.

Life Insurance Tax

Current tax is the expected tax payable on the taxable income for the period, using tax rates enacted or substantially enacted at balancedate after taking advantage of all allowable deductions under current taxation legislation and any adjustment to tax liabilities in respect ofprevious years.

Income Tax on the Net Profit for the period comprises current and deferred tax. Income tax is recognised in the Income Statement exceptto the extent that it relates to items recognised directly within Shareholder's Equity, in which case it is recognised directly in Shareholder'sEquity.

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 amounts of assets andliabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based onthe expected manner of realisation or settlement of the amount of assets and liabilities, using tax rates enacted or substantively enacted atbalance 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. morelikely than not) that a future taxable profit will be available against which the asset can be utilised. Deferred Taxation Benefits are reducedto 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 carryingamount may not be recoverable. If an asset's carrying amount is greater than its estimated recoverable amount, the carrying amount iswritten down to its recoverable amount. The recoverable amount is the higher of the asset's fair value less costs to sell and the asset'svalue in use. Any impairment loss is recognised in the Income Statement. To assess impairment, assets are allocated to cash generating

it

Investments in Subsidiaries are recognised in the Balance Sheet at the lower of cost or recoverable amount. Investment in Subsidiariesare assessed for impairment annually or more regularly where an indication of impairment exists. If any such indication exists, the asset'srecoverable amount is estimated, and an impairment loss is recognised in the Income Statement for the difference between the carryingamount 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 itto be operating in the manner intended by management. The estimated useful lives of the major assets are:

The Life Group offsets financial assets and financial liabilities and reports the net balance in the Balance Sheet where there is a legallyenforceable 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.

Property, Plant and Equipment are stated at cost less accumulated depreciation and impairment losses.

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

Assets are reviewed for impairment indicators annually to identify events or changes in circumstances that indicate that the carryingamount may not be recoverable. If an asset's carrying amount is greater than its estimated recoverable amount, the carrying amount iswritten down to its recoverable amount. The recoverable amount is the higher of the asset's fair value less costs to sell and the asset'svalue in use. Any impairment loss is recognised in the Income Statement. For the purposes of assessing impairment, assets are groupedat the lowest level for which there are separately identifiable cash flows (cash generating units).

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

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

Life Insurance Contract Liabilities are calculated in a way that allows for the systematic release of planned profit margins as services areprovided to policy owners and the revenues relating to those services are received. Services used to determine profit recognition includethe cost of expected insurance claims and annuity payments. Life Insurance Contract Liabilities are generally determined as the presentvalue 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 futurepayments (including tax) and premiums. Where actual experience replicates best estimate assumptions, the expected profitmargins 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 toexperience profits / (losses) include variations in claims, expenses, mortality, discontinuance and investment returns (to the extentthe Shareholder assumes investment risk).

Life insurance contracts are those contracts that transfer significant insurance risk. Life investment contracts are those contracts with nosignificant 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 NewZealand 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 InsuranceContracts are accounted for in accordance with the requirements of NZ IFRS 4 Insurance Contracts . Life Investment Contracts areaccounted for in accordance with NZ IAS 18 Revenue and NZ IAS 39.

Assumptions used for measuring life insurance contract liabilities are reviewed each period. Where the review leads to a changein assumptions, the change is deemed to have occurred from the end of the period.

All contracts issued by the Life Group which are classified as Life Insurance Contracts are non linked. The assets backing unit linkedcontracts 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 therates are changed. The financial effect of all other changes to assumptions is recognised in the Income Statement over the futureyears 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 totalexpected loss for that related product group is recognised in the Income Statement immediately. When loss making businessbecomes profitable previously recognised losses are reversed.

Profits are generated from investment assets in excess of those required to meet policy liabilities. Investment earnings are directlyinfluenced by market conditions and as such this component of MoS profit will vary from period to period.

The fair value of a term deposit bond is determined as the present value of future expected cashflows payable under the bonddiscounted at the risk free rate of return appropriate to the outstanding term of the bond portfolio.

All contracts issued by the Life Group which are classified as investment contracts are unit-linked except for term deposit bonds. The fairvalue of a unit linked contract is determined using the current unit values that reflect the fair value of the financial assets backing thecontract, multiplied by the number of units attributed to the contract holder.

Reinsurance recoveries for claims are recognised as Reinsurance Income. Reinsurance premiums are recognised as ReinsuranceExpenses.

Reinsured Life Insurance Contracts are the present value of future reinsurance claims receivable and premiums payable by the LifeGroup.

Contracts entered into by the Life Group with reinsurers which meet the definition of an insurance contract have been classified as anasset Reinsured Life Insurance Contracts in the Balance Sheet. Reinsurance contracts that do not meet this definition have beenclassified as a financial asset Reinsured Life Investment Contracts.

As the reinsurance agreements provide for indemnification of the Life Group by the reinsurers against loss or liability, reinsuranceincome and expenses are recognised separately in the Income Statement when they become due and payable in accordance with thereinsurance agreements.

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


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.

Reinsured Life Investment Contracts are measured at fair value. The fair value is determined using the current unit values that reflect thefair value of the financial assets backing the contract, multiplied by the number of units attributed to the contract holder.

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:

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.

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.

Defined contribution plans are post-employment benefit plans under which an entity pays fixed contributions into a separate entity and willhave no legal or constructive obligation to pay further contributions if the fund does not hold sufficient assets to pay all employee benefitsrelating 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 employercontributions 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.

The liability or asset recognised in the Balance Sheet in respect of defined benefit superannuation plans is calculated separately for eachplan by estimating the amount of future benefit that employees have earned in return for their service in current and prior periods; thatbenefit is discounted to determine the present value, and the fair value of the plans assets are deducted. The discount rate is the yield atbalance sheet date on government securities which have terms to maturity approximately the same as the related liability. The definedbenefit 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 theseplans are held independently of the Life Group’s assets in separate trustee administered funds. The Life Group has both defined benefitand defined contribution plans.

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 InsuranceContract 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 BalanceSheet to the extent that the Life Group has a legal right and intent to realise the Deposited Reserves to simultaneously settle anyreinsurance claims on those contracts.

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 differenteconomic environments or political conditions. On this basis no geographical segment information is provided, except for Concentrationsof Credit Exposures (refer to Note 48).

The Life Group discloses a Contingent Liability when it has a possible obligation arising from past events, that will be confirmed by theoccurrence or non-occurrence of one or more uncertain future events not wholly within the Life Group's control. A Contingent Liability isdisclosed when a present obligation is not recognised because it is not probable that an outflow of resources will be required to settle anobligation, 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 LifeGroup and take into account the nature of the products and services provided. Segment results include items directly attributable to asegment 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 beenbroken into two separate Groups, and separate disclosures compiled for each group. Transactions between the Life Group (reportingentity) 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. 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).

16



(u) Expense Recognition

(v) COMPARATIVE DATA

GLOSSARY OF TERMS

Discretionary Participation Feature

Effective Interest Method

Fair Value

Fair Value Hedge

Financial Instruments at Fair Value through Profit or Loss

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

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.

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 interest method.

Monetary Assets and Liabilities

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 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 interest 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 Instrument

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.

Hedge IneffectivenessThe amount by which changes in the cash flow of the hedging derivative differ from changes (or expected changes) in the cash flow of thehedged item, or the amount by which the changes in the fair value of the hedging derivative differ from changes in the fair value of thehedged item. Such gains and losses are recorded in the current period Income Statement.

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

Hedge Effectiveness

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

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

A contractual right to receive, as a supplement to guaranteed benefits, significant additional benefits, where the amount and timing of thoseadditional benefits is at the discretion of the Life Group.

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

The amount at which the financial asset or financial liability is measured at initial recognition minus principal repayments, plus or minus thecumulative amortisation using the effective interest method of any difference between that initial amount and the maturity amount, and minusany reduction (directly or through the use of an allowance account) for impairment or uncollectibility. Available for Sale Financial AssetsNon-derivative financial assets intended to be held for an indefinite period of time, and which may be sold in response to needs for liquidity orchanges in interest rates or exchange rates. They are recognised on acquisition at fair value plus transaction costs and thereafter at fairvalue. Changes in the value of Available for Sale Financial Assets are reported in an Available for Sale Reserve in Equity, until the assetsare sold or otherwise disposed of, or until they are impaired. On disposal the accumulated change in fair value is transferred to the IncomeStatement and reported under Other Income. Interest, premiums and discounts are amortised through the Income Statement using theeffective interest method.

Amortised Cost of Financial Asset or Financial Liability

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

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

17


1A Discontinued Operations

$ millions NoteContinuing Operations

Discontinued Operations Total

For the Period Ended 31 December 2007Unaudited

Premium Income 4 223 - 223Reinsurance Income 5 30 - 30Investment Income 6 69 1 70Revaluation of Borrowings and Swaps 7 11 - 11Other Income 7 17 23 40



Reinsurance Expenses 5 37 - 37Claims, Surrenders and Maturities 8 157 - 157Other Operating Expenses 1 - 1Net Change in Life Insurance Contract Liabilities 21 (44) - (44)Net Change in Life Investment Contract Liabilities 21 (20) - (20)Commission and Management Expenses 9 124 24 148Finance Costs 23 - 23

Net Profit before Taxation 36 72 - 72

Taxation 11 21 - 21

Net Profit after Taxation 3 51 - 51



For the Period Ended 30 June 2008Audited

Premium Income 4 448 - 448Reinsurance Income 5 62 - 62Investment Income 6 (23) 1 (22)Revaluation of Borrowings and Swaps 7 25 - 25Other Income 7 31 46 77



Reinsurance Expenses 5 72 - 72Claims, Surrenders and Maturities 8 299 - 299Other Operating Expenses 4 - 4Net Change in Life Insurance Contract Liabilities 21 (168) - (168)Net Change in Life Investment Contract Liabilities 21 (104) - (104)Commission and Management Expenses 9 251 63 314Finance Costs 48 - 48

Net Profit / (Loss) before Taxation 36 141 (16) 125

Taxation 11 27 (5) 22

Net Profit / (Loss) after Taxation 3 114 (11) 103

A Discontinued Operation is a component of the Life Group's business that represents a separate major line of business area that has beendisposed of or 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 CustodialServices Limited and Jacques Martin New Zealand Limited to fellow subsidiary of CBA, ASB Bank Limited for consideration of $58m cash andcash equivalents. This resulted in derecognition of Net Tangible Assets of $10m in the Life Group. A Gain on Sale of $48m was recorded inthe Life Group due to the sale of the above entities during the period ended 31 December 2008. The sale of the above entities resulted in theLife Group having no operations in the Asset Management segment for the period ended 31 December 2008 (refer note 36).

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:

18


1A Discontinued Operations (continued)




ASSETSFinancial Assets - Cash and Cash Equivalents 14 559 11 570 - Securities 13 2,113 - 2,113 - Derivative Financial Instruments 15 74 - 74 - Trade and Other Receivables 19 66 5 71 Reinsured Life Insurance Contracts 22 60 - 60 Current Income Taxation Asset 65 1 66 Property, Plant and Equipment 17 39 - 39 Intangible Assets 18 564 1 565 Other Assets 20 26 - 26

Total Assets 3,566 18 3,584

LIABILITIESLife Insurance Contract Liabilities 21 746 - 746

Financial Liabilities - Life Investment Contracts 21 1,186 - 1,186 - Borrowings 24 407 - 407 - Derivative Financial Instruments 15 25 - 25 - Deposited Reserves 22 40 - 40 - Trade and Other Payables 25 145 8 153 Deferred Taxation Liability 23 108 (5) 103 Provisions 26 1 5 6

Total Liabilities 2,658 8 2,666

Cash Flows for the Discontinued Operations can be analysed as follows:

Unaudited Unaudited AuditedFor the Period Ended 31-Dec-08 31-Dec-07 30-Jun-08$ millions 6 months 6 months 12 months

Net Cash Flows from Operating Activities (4) 1 (4)Net Cash Flows from Investing Activities (8) (1) (8)

(12) - (12)

Excluding intercompany amounts, the assets and liabilities of the Discontinued Operations can be analysed as follows:

Life Group

Life Group

Net Decrease in Cash and Cash Equivalents at End of Period

19


2 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 55% to 120% (31 December 2007 55% to 120%, 30 June 2008 55% to 120%).

Policy liabilities and solvency reserves as at 31 December 2008 for Sovereign Assurance Company Limited ("SACL") and The ColonialMutual 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’scurrent asset mix. Fixed interest investments were assumed to earn 4.6% per annum ("pa") (31 December 2007 6.4% pa, 30 June2008 6.3% pa) and equity investments 8.6% pa (31 December 2007 10.4% pa, 30 June 2008 10.3% pa). The discount rates used forindividual classes of business varied between 4.6% and 8.6% (31 December 2007 6.4% and 10.4%, 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 4.6% pa was used at 31 December 2008 (31 December 2007 6.4% pa, 30 June 2008 6.3% pa). Forother risk business a rate of 4.3% pa was used at 31 December 2008 (31 December 2007 7.1% pa, 30 June 2008 6.3% pa). Theserates 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 ofActuaries together with the requirements of NZ IFRS 4. The actuary is satisfied as to the accuracy of the data from which the amount of LifeInsurance Contract liabilities has been determined.

Assumptions for the incidence of withdrawal, partial termination and transfer of policies to paid-up are primarily based on investigationsof the Life Group's own experience.

Most discontinuance rates used at 31 December 2008 are unchanged 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 agreementwith Sovereign Services Limited and ASB Group Investments Limited. Future inflation has been assumed to be 2.5% pa (31 December2007 2.5% 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. Thecorporate tax rate used was 30%, the rate applicable from 1 July 2008 (previously 33%). Allowance has been made for the "fairdividend rate" rules that apply to global equities, where tax is paid on 5% of the market value of investments, regardless of the actualrate of investment income.

Future morbidity experience has been based on a combination of reinsurers tables, industry experience and internal investigations. Forsignificant classes of business, internal experience is compared with reinsurer's tables using geometric smoothing techniques or movingaverages.

There have been no changes to morbidity assumptions since 30 June 2008.

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 mortalitytable for CMLA. Annuitant mortality was assumed to be a proportion of the PMA92 and PMF92 tables. These are then adjusted bycomparing the standard tables with the Life Group's own experience using geometric smoothing techniques or moving averages. Forannuity business, an adjustment is also made for mortality improvements prior to and after the valuation date.

20


Unaudited Unaudited AuditedFor the period ended 31-Dec-08 31-Dec-07 30-Jun-08


2 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% 3% 4%Term Life Insurance 8% 8% 8%Trauma Insurance 11% 8% 11%Disability Income Insurance 9% 11% 9%Wholesale Investment Account 20% 20% 20%

Sovereign Assurance Company LimitedRisk Policies 13% 13% 13%Savings Policies 9% 10% 9%Participating Policies 4% 5% 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 0.70% 1.44% 0.70%

Bonus rate on existing bonus 0.70% 1.44% 0.70%

Whole of life policies Bonus rate on sum assured 0.80% 1.00% 0.80%Bonus rate on existing bonus 0.80% 1.00% 0.80%

Sovereign Assurance Company LimitedEx-Prudential policies Bonus rate on sum assured 2.00% 2.15% 2.00%

Bonus rate on existing bonus 2.00% 2.15% 2.00%

Ex-NZI policies Bonus rate on sum assured 1.00% 1.23% 1.00%Bonus rate on existing bonus 2.00% 2.45% 2.00%

(j) Impact of Changes in Assumption

$ millions

Assumption ChangeMarket related changes to discount rates 131 (11)Other assumptions 2 -

Effect on Future Profit Margins

Effect on Life Insurance Contract Liabilities

Life Group

Refer to Note 1(n) for an explanation of the treatment of changes in actuarial assumptions on Life Insurance Contract Liabilities.The impact of changes in actuarial assumptions made at 31 December 2008 are as follows:

Surrender values are based on the provisions specified in the policy contract. There have been no changes to surrender basesduring the period (or the prior periods) 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 commensuratewith 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 indistributions at a maximum allowable rate of 20% (31 December 2007 20%, 30 June 2008 20%).

In applying the policyholders' share of profits to provide bonuses, consideration is given to equity between generations ofpolicyholders and equity between the various classes and sizes of policies in force. Assumed future bonus rates included in LifeInsurance Contract Liabilities were set such that the present value of Life Insurance Contract Liabilities equates to the presentvalue of assets supporting the business together with assumed future investment returns, allowing for the shareholder's right toparticipate in distributions.

Ex-Metropolitan Life participating products are treated in the same manner as other investment account contracts, with bonusrates being based on a gross earning rate of 8.0% pa (31 December 2007 8.0% pa, 30 June 2008 8.0% pa), less tax and anequivalent charging structure. The supportable bonus concept does not apply.

21


Unaudited Unaudited AuditedFor the period ended 31-Dec-08 31-Dec-07 30-Jun-08$ millions Note 6 months 6 months 12 months

3 Net Profit after Taxation

Net Profit after Taxation arose from:

Planned Margins of Revenues over Expenses 29 26 56 Difference between Actual and Assumed Experience (4) 3 11 Effects of Changes in Underlying Assumptions 11 (1) 4

36 28 71

Planned Margins of Revenues over Expenses 8 7 15 Difference between Actual and Assumed Experience 1 (1) (3)

9 6 12 Investment Earnings on Assets in Excess of Life Insurance and Investment Contracts Liabilities 15 16 27 Total Life Activities 60 50 110

Finance Costs (19) (23) (48)Other 8 24 41

(11) 1 (7)Net Profit after Taxation 1A 49 51 103

4 Premium Income

Total PremiumsLife Insurance Contract Premiums - disclosed in Income Statement 252 223 448

40 52 102 292 275 550

5 Reinsurance

Reinsurance Recoveries - Life Insurance Contracts 16 14 30 Portfolio Reinsurance Recoveries 8 7 14 Reinsurance Recoveries - Life Investment Contracts 10 9 18 Total Reinsurance Income 34 30 62

Reinsurance Risk Premiums - Life Insurance Contracts 25 20 40 Portfolio Reinsurance Expenses 8 8 14 Reinsurance Expenses - Life Investment Contracts 10 9 18 Total Reinsurance Expenses 43 37 72

Life Investment Contract Deposit Premiums - disclosed in Life Investment Contract Liabilities

The disclosure of the components of operating profit after income tax expense are required to be separated between policyholders’ andshareholder's interests. We have included only one column, as any policyholder profits are an expense of the Group and not attributable to theshareholder.

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 priorto 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 sharedwith the Life Group.

The Life Group has reinsured 93.1% of all Metropolitan Life business. Policy reserves are deposited back by the reinsurers.

The amounts repayable to the reinsurers under these agreements are subordinated to the claims of policyholders.

22


Unaudited Unaudited AuditedFor the period ended 31-Dec-08 31-Dec-07 30-Jun-08$ millions 6 months 6 months 12 months

6 Investment Income

Life Insurance ContractsIncome from:Equity Securities (102) 8 (68)Fixed Interest Securities 77 59 99 Mortgage Investments - - 1 Loans on Policies 1 1 3 Property Investments (6) (14) (12)

(30) 54 23

Life Investment ContractsIncome from:Equity Securities (120) (12) (78)Fixed Interest Securities 24 18 26 Property Investments (9) 4 (7)

(105) 10 (59)

Other Investment IncomeIncome from:Interest on Cash at Bank 2 - 2 Interest on Interest Rate Swaps and Annuity 2 5 11 Other Investments - 1 1

4 6 14

Total Investment IncomeIncome from:Equity Securities (222) (4) (146)Fixed Interest Securities 101 77 125 Mortgage Investments - - 1 Loans on Policies 1 1 3 Property Investments (15) (10) (19)Other Investments 4 6 14 Total Investment Income 1A (131) 70 (22)

Income from Equity Securities includes distributions from unit trusts.

7 Other Income

Revaluation of Borrowings and SwapsNet Gain / (Loss) from Foreign Exchange Revaluation 24 (11) (52)Net (Loss) / Gain from Movement in Fair Value of Swaps (102) 22 77

(78) 11 25

Other IncomeManagement and Other Fees 15 40 76 Income from Financing Arrangements 1 - 1 Total Other Income 1A 16 40 77

Included within Equity Securities is dividend income of $19m (31 December 2007 $31m, 30 June 2008 $50m), included within TotalInvestment Income is interest income of $45m (31 December 2007 $48m, 30 June 2008 $95m) and included within Total Investment Incomeare net realised and unrealised losses of $195m (31 December 2007 losses of $10m, 30 June 2008 losses of $168m) including net realisedand unrealised losses on Derivative Instruments of $232m (31 December 2007 losses $48m, 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 Nil (31 December2007 $14m, 30 June 2008 $26m).

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.

23



8 Claims, Surrenders and Maturities

Life Insurance Contracts Death, Disability and Medical Claims 122 115 225 Maturities 17 21 35 Surrenders 22 28 48 Annuities 3 3 6

164 167 314

Risk Claims - disclosed in the Income Statement 163 157 299 Deposit Claims - disclosed in Life Insurance Contract Liabilities 21 1 10 15

164 167 314

Life Investment Contracts Deaths 1 1 3 Maturities 1 3 4 Surrenders 109 92 185

111 96 192

Deposit Claims - disclosed in Life Investment Contract Liabilities 21 111 96 192

Total Life Claims 275 263 506

Death, Disability and Medical Claims 123 116 228 Maturities 18 24 39 Surrenders 131 120 233 Annuities 3 3 6 Total Life Claims 275 263 506

Risk Claims - disclosed in the Income Statement 163 157 299 Deposit Claims - disclosed in Life Liabilities 112 106 207 Total Life Claims 275 263 506

9 Commission and Management Expenses

Life Insurance Contract Expenses

Acquisition Costs:Commission and Other Direct New Business Costs 48 37 78 Management Expenses 24 21 46

72 58 124 Maintenance Costs:

Commission 25 21 41 Management Expenses 21 20 38

46 41 79 Investment Management Costs 4 4 8 Total Life Insurance Contract Expenses 122 103 211

Life Investment Contract Expenses

Acquisition Costs:Commission and Other Direct New Business Costs - 1 1 Management Expenses 1 1 1 Deferred Acquisition Cost Amortisation 1 1 3



6 7 15 Investment Management Costs 3 4 8

11 14 28 Total Life Investment Contract Expenses 133 117 239

Life Group

24



9 Commission and Management Expenses (continued)

Life Expenses

Acquisition Costs:Commission and Other Direct New Business Costs 48 38 79 Management Expenses 25 22 47 Deferred Acquisition Cost Amortisation 1 1 3



52 48 94 Investment Management Costs 7 8 16 Total Life Expenses 133 117 239

Non-Life Expenses:

Management Expenses: Superannuation - - 1 Management Expenses: Asset Management 2 26 67 Other Expenses 4 5 7 Total Non-Life Expenses 6 31 75 Total Commission and Management Expenses 1A 139 148 314

Additional DisclosuresOperating Lease Costs 3 4 7 Impairment*

Leasehold Improvements - - (1)Intangible Assets - - 9

Amortisation of Intangible Assets*Internally Developed Software 1 - - Other - 1 1

DepreciationLeasehold Improvements 2 1 3 Office Equipment, Furniture and Fittings & Computer Equipment 1 1 2

Employee Benefits Expense - Wages and Salaries 36 53 104 Fiduciary Expenses (Asset Management) 7 5 10

10 Auditor's Remuneration

PricewaterhouseCoopers is the appointed auditor of the Life Group.

Audit and audit related service fees paid to PricewaterhouseCoopers for the period ended 31 December 2008 were $465k (31 December2007 $804k, 30 June 2008 $1,328k). Fees incurred for Other Services were $30k (31 December 2007 $109k, 30 June 2008 $170k), includingfees for Taxation Related Services of $11k (31 December 2007 $66k, 30 June 2008 $66k).

Life Group

* Impairment of Leasehold Improvements, Office Equipment, Furniture and Fittings, Computer Equipment and Amortisation of IntangibleAssets are included within Commission and Management Expenses in the Income Statement.

25



11 Taxation

Taxation (Benefit) / Expense comprises:Value of current year tax (losses) / profits (27) 12 (11)Adjustment to prior periods - - (9)Deferred Tax - current year 23 20 4 21 Deferred Tax - prior year 23 - - 12

(7) 16 13

Taxation Recognised in the Income Statement 1A (3) 21 22 Recognised in Equity: Taxation on Branch Profit Repatriated 29 (4) (5) (9)

(7) 16 13

Net (Loss) / Profit before Taxation 1A (2) 72 125 Tax at the Domestic Rate - 24 41 Tax Impact of Income Not Subject to Taxation (90) (33) (133)Tax Impact of Expenses Not Deductible for Tax Purposes 87 30 114 Taxation Expense 1A (3) 21 22

The weighted average applicable tax rate was: -150% 29% 18%

12 Imputation and Policyholder Credit Accounts

$ millions ICA Group CMLA Total

For the six months ended 31 December 2008Unaudited

Imputation Credit AccountBalance at Beginning of Period 13 19 32 Net Income Tax Refunded (2) - (2)Imputation Credits Attached to Dividends Received 11 - 11 Less: Imputation Credits Attached to Dividends Paid 13 - 13

Balance at End of Period 9 19 28

Policyholder Credit AccountBalance at the Beginning of Period - 1 1 Balance at the End of Period - 1 1

Life Group

The decrease in the weighted average tax rate for the period ended 31 December 2008 is due to the change in the level of life premiums andclaims, movement in policyholder reserves, the impact of the tax treatment of investment income and investment losses.

Taxation on the Life Group's Net (Loss) / Profit before Taxation differs from the theoretical amount that would arise using the domestic rate asfollows:

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 (andshareholders of other ICA Group members).

Net taxable losses of $93m (31 December 2007 $30m profit, 30 June 2008 $39m) have been generated by the Life Group for the period ended31 December 2008. Provisional tax payments of Nil (31 December 2007 $12m, 30 June 2008 $25m) have been made.

ASB Group (Life) Limited, together with a number of its subsidiary companies, form a consolidated group for income tax purposes (the"Consolidated Tax Group"). The members of the Consolidated Tax Group are: ASB Group (Life) Limited, Sovereign Assurance CompanyLimited and Jacques Martin New Zealand Limited.

The availability of income tax losses carried forward and recognised is subject to statutory requirements being met.

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

The Life Group has formed an imputation group with other members of the Commonwealth Bank of Australia Group (the "ICA Group"). Theclosing imputation credit account balances presented below represent the imputation credits available to all members of the ICA.

26


12 Imputation and Policyholder Credit Accounts (continued)

$ millions ICA Group CMLA Total


Imputation Credit AccountBalance at Beginning of Period 79 14 93 Net Income Tax Paid (49) 3 (46)Imputation Credits Attached to Dividends Received 15 1 16 Less: Imputation Credits Attached to Dividends Paid 20 - 20 Transfer to CMLA PCA - (5) (5)Balance at End of Period 25 13 38

Policyholder Credit AccountBalance at Beginning of Period 57 1 58 Transfer from CMLA ICA - 5 5 Policyholder Liability CMLA - (5) (5)Balance at End of Period 57 1 58

For the year ended 30 June 2008Audited

Imputation Credit AccountBalance at Beginning of Period 79 14 93 Net Income Tax Paid 38 9 47 Imputation Credits Attached to Dividends Received 106 1 107 Less: Imputation Credits Attached to Dividends Paid 267 - 267 Transfer from / (to) Policy Credit Account 57 (5) 52 Balance at End of Period 13 19 32

Policyholder Credit AccountBalance at Beginning of Period 57 1 58 Transfer (to) / from Imputation Credit Account (57) 5 (52)Policyholder Liability CMLA - (5) (5)Balance at End of Period - 1 1

27


$ millionsUnaudited Unaudited Audited

As at Note 31-Dec-08 31-Dec-07 30-Jun-08

13 Securities

Equity SecuritiesShares in Listed Companies 491 805 692 Unit Trusts and Managed Funds 286 517 478

777 1,322 1,170

Fixed Interest Securities 13a 932 819 800

Mortgage InvestmentsMortgages 13b 8 10 9 Unit Trusts and Managed Funds - 32 28 Loans on Policies 28 29 29

36 71 66

Property InvestmentsUnit Trusts and Managed Funds 45 77 71

Annuity Investment 13c 6 6 6

Total Securities 1,796 2,295 2,113

Equity Securities 212 475 434 Debt Securities 750 723 646 Property Investments 23 73 67

985 1,271 1,147

13a Fixed Interest Securities

New Zealand Government Stock 50 65 59 Company Debentures 145 152 157 Medium Term Notes 30 - 30 Foreign Government Stock 707 602 554

932 819 800 Maturity Analysis:Under One Year 18 17 16 Between One and Two Years 10 26 29 Between Two and Three Years 98 77 97 Between Three and Four Years 76 100 102 Between Four and Five Years 105 81 71 Greater than Five Years 625 518 485

932 819 800

13b Mortgages

Spectrum Plus New Zealand Mortgage Trust

Mortgage Valuations

13c Annuity Investment

14 Cash and Cash Equivalents

Cash at Bank and on Deposit 566 578 548 Foreign Currency Deposits 18 9 22 Total Cash and Cash Equivalents 1A, 38 584 587 570

Securities include Mortgages carried at an estimated fair value of $8m (31 December 2007 $10m, 30 June 2008 $9m). This fair value wasderived using a valuation technique that uses experienced judgement to estimate the credit risk component of the valuation. The experiencedjudgement is not supported by observable market prices; it is based on assessments concerning economic conditions, loss experience, andthe risk characteristics associated with the particular mortgages. These assessments are subjective in nature and the range of possiblealternative assumptions is considered immaterial. The impact of credit risk on the fair value of mortgages as at 31 December 2008 is $1m (31December 2007 $1m, 30 June 2008 $1m). The change in fair value due to change in the credit risk for the period ended 31 December 2008 isNil (31 December 2007 Nil, 30 June 2007 Nil).

The fair value of the Annuity Investment was derived using a valuation technique that is supported by observable market prices. The maximumcredit risk of the annuity investment is the carrying amount. The amount of change during the period that is attributable to changes in creditrisk is Nil (31 December 2007 Nil, 30 June 2008 Nil).

As at 31 December 2008 no Securities were pledged under repurchase agreements or other arrangements (31 December 2007 Nil, 30 June2007 Nil).

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.

The Life Group sold its holdings in the Spectrum Plus New Zealand Mortgage Trust (managed and promoted by the Life Group) on 8December 2008.

28



Non-hedge Derivatives at Fair Value through Profit or Loss

Notional and Fair Values

NotionalUnaudited Amount Assets Liabilities

As at 31 December 2008

FAIR VALUE THROUGH PROFIT OR LOSS

Exchange Rate ContractsForward Contracts - Buy 237 2 8 Forward Contracts - Sell 1,435 55 34

Total Exchange Rate Contracts 1,672 57 42

Interest Rate Swaps 1,814 12 46

Total Derivative Financial Instruments 69 88

The Life Group held the following interest rate swaps as at 31 December 2008:

Counterparty Basis Maturity Notional RatesAmount

Deutsche Bank Floating for Floating Rate 25/11/2016 Pay NZD 787 BBR FRA plus 0.68% (9.41%)Receive AUD 700 BBR BBSW plus 1% (8.78%)

ASB Bank Floating for Fixed Rate 01/01/2009 to 31/12/2009 NZD 340 Weighted Fixed Rate (7.43%)ASB Bank Floating for Fixed Rate 01/01/2010 to 31/12/2010 NZD 347 Weighted Fixed Rate (7.71%)ASB Bank Floating for Fixed Rate 01/01/2011 to 31/12/2011 NZD 340 Weighted Fixed Rate (8.09%)

1,814

$ millions NotionalAmount Assets Liabilities



Exchange Rate ContractsForward Contracts - Buy 42 - 1 Forward Contracts - Sell 1,463 18 5


Interest Rate Swaps 1,814 14 -


Life Group

Unaudited Fair Value

$ millions Fair Value

The Life Group enters into derivative transactions which provide economic hedges for risk exposures but do not meet the accountingrequirements for hedge accounting treatment. As stated in Note 1, Summary of Significant Accounting Policies, Part (g) Derivative FinancialInstruments, the Life Group purchases forward currency contracts as economic hedges to manage foreign exchange risk and interest rateswaps as economic hedges to manage interest rate risk. Gains or losses on the forward contracts have been recorded in Investment Incomewith the gains or losses on the Securities they economically hedged. Gains or Losses on the interest rate swap and foreign currency couponswap have been recorded in Other Income with the Foreign Exchange Revaluation gains or losses on the Borrowings to which they relate.

The forward currency contracts taken out do not exceed 6 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 theBalance Sheet. This amount is not necessarily exchanged and does not indicate the Life Group’s exposure to price risk. The amountpredominantly acts as a reference value upon which interest payments and net settlements can be calculated and on which revaluation isbased. The “Face Value” of derivative financial instruments on hand, the favourable or unfavourable market values of these instruments, andthe consequent aggregate fair values of derivative financial assets and liabilities can fluctuate significantly from time to time. The fair values ofderivative instruments held are set out in the following table.

29



$ millions NotionalAudited Amount Assets Liabilities

As at 30 June 2008


Exchange Rate ContractsForward Contracts - Buy 44 1 - Forward Contracts - Sell 1,339 2 24


Interest Rate Swaps 1,814 71 1


16 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 Holdings Limited 100 Investment AdministrationKiwi 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-tradingSylvia Park Business Centre Limited 100 Administration ServicesThe 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, ASB Group Investments Limited, Investment Custodial Services Limited and Jacques Martin New Zealand Limited to fellow subsidiary of the CBA, ASB Bank Limited (refer to note 1A for further details).

Holdings in the Spectrum Plus New Zealand Mortgage Trust were sold on 8 December 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 Leasehold Improvements

Office Equipment, Furniture & Fittings and

Computer Equipment Total

17 Property, Plant and Equipment

UnauditedFor the six months ended 31 December 2008

Cost 38 13 51 Accumulated Depreciation (4) (8) (12)Opening Net Book Value 34 5 39

Additions - - - Disposal - Cost (2) (4) (6)Disposal - Accumulated Depreciation 2 4 6 Depreciation (2) (1) (3)Closing Net Book Value 32 4 36

Cost 36 9 45 Accumulated Depreciation (4) (5) (9)Closing Net Book Value 32 4 36


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 - 36 Work in Progress (33) - (33)Disposal - Cost (4) (17) (21)Disposal - Accumulated Depreciation 4 16 20 Depreciation (1) (1) (2)Disposal - Accumulated Impairment - 1 1 Closing Net Book Value 35 4 39

Cost 38 11 49 Accumulated Impairment (1) - (1)Accumulated Depreciation (2) (7) (9)Closing Net Book Value 35 4 39

AuditedFor the year ended 30 June 2008

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 34 5 39

Life Group

31


$ millions Note Goodwill

Internally Developed

Software Other Intangible

Assets Total

18 Intangible Assets


Cost 559 24 3 586 Accumulated Amortisation - (5) (3) (8)Accumulated Impairment - (13) - (13)Opening Net Book Value 559 6 - 565

Additions - 2 1 3 Disposal - Cost - (10) (2) (12)Disposal - Accumulated Amortisation - - 2 2 Disposal - Accumulated Impairment - 9 - 9 Amortisation - (1) - (1)Closing Net Book Value 559 6 1 566

Cost 559 16 2 577 Accumulated Amortisation - (6) (1) (7)Accumulated Impairment - (4) - (4)Closing Net Book Value 559 6 1 566


Cost 559 13 3 575 Accumulated Amortisation - (6) (2) (8)Accumulated Impairment - (4) - (4)Opening Net Book Value 559 3 1 563

Additions - 9 1 10 Disposal - Cost - (1) - (1)Disposal - Accumulated Amortisation - 1 - 1 Amortisation - - (1) (1)Revaluation - Closing Net Book Value 559 12 1 572

Cost 559 21 4 584 Accumulated Amortisation - (5) (3) (8)Accumulated Impairment - (4) - (4)Closing Net Book Value 559 12 1 572

Closing Net Book ValueFor the year ended 30 June 2008

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 1A 559 6 - 565

The Life Group's full carrying amount of Goodwill is attributable to the Life Insurance and Superannuation cash generating unit.

Impairment Tests for Goodwill

Life Group

The appraisal value methodology employed in assessing excess market value over net tangible assets of ASBGL and CMLA is deemed bymanagement to be an appropriate proxy for determining value in use. The appraisal value is a discounted cash flow valuation, taking accountof existing and future business. The key assumptions used in the projection of cash flows are the same as those key assumptions used indetermining policy liabilities (refer to Note 2). The discount rates used at 31 December 2008 were 10.43% for life insurance business (31December 2007 10.83%, 30 June 2008 10.43%) and 12.35% for funds management and unit linked business (31 December 2007 12.75%, 30June 2008 12.35%). These assumptions were determined based on management's expectations for market development.

Goodwill 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 a cash-generating unit to whichgoodwill has been allocated is tested for impairment annually, and whenever there is an indication that the goodwill may be impaired. Therecoverable amounts are determined based on value-in-use calculations.

32


18 Intangible Assets (continued)


19 Trade and Other Receivables (Current)

Trade Accounts Receivable 19a 19 16 18 Amounts Due from Reinsurers 5 5 10 Amounts Due from Related Parties 32 3 9 6 Investment Receivables 26 29 28 Other Current Assets 4 10 9 Total Trade and Other Receivables 1A, 38 57 69 71

19a Trade Accounts ReceivableAgent Balances Receivable 1 1 1 Retirement Benefit Obligations 18 15 17

19 16 18

20 Other Assets

Deferred Acquisition Cost - Life Investment Contract Liabilities 24 26 25 Retirement Benefit Obligations 20a 1 2 1

25 28 26

20a Retirement Benefit Obligations

Recognition of Actuarial Gains and Losses

Actuarial gains and losses are fully recognised each year.

Description of Plans

$ millions Unaudited Unaudited Audited Unaudited Unaudited Audited As at 31-Dec-08 31-Dec-07 30-Jun-08 31-Dec-08 31-Dec-07 30-Jun-08

Reconciliation of Amounts Recognised in the Balance Sheet

Present Value of Funded Obligations (4) (5) (4) (5) (5) (5)Fair Value of Fund Assets 4 4 4 10 10 10 (Deficit) / Surplus - (1) - 5 5 5

Adjustment for Limit on the Use of Net Assets - - - (4) (4) (4)- (1) - 1 1 1

Specified Superannuation Contribution Withholding Tax - - - - 1 - (Liability) / Asset Recognised in the Balance Sheet - (1) - 1 2 1

Reconciliation of the Present Value of Funded Obligations

Present Value of Funded Obligations at Beginning of Period 4 5 5 5 5 5 Interest Cost - - - - - 1 Benefits Paid - - (1) - - (1)Present Value of Funded Obligations at End of Period 4 5 4 5 5 5

Reconciliation of the Fair Value of Fund Assets

Fair Value of Fund Assets at Beginning of Period 4 4 4 10 10 10 Expected Return on Assets - - - - - 1 Actuarial Gains - - 1 - - - Benefits Paid - - (1) - - (1)Fair Value of Fund Assets at End of Period 4 4 4 10 10 10

The recoverable amount for the life insurance business has been determined based on a fair value calculation. The calculation requires ASBGLand CMLA to make an estimate of the total of the adjusted net worth of the life insurance business plus the value of in-force covered business.This is calculated in accordance with the embedded value principles. New business contribution represents the present value of the projectedfuture distributable profits generated from business written in a period. Growth and discount rates used are suitable rates which reflect the risksof underlying cash flows. The cash flow projections are based on best estimate assumptions of future experience for the expected duration ofpolicies. The Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill was introduced into Parliament on 2 July 2008 andincludes comprehensive changes to the current taxation of life insurance business in New Zealand. The likely impact of these proposedchanges has been considered in our assessment of impairment of goodwill.

Goodwill of $52m also arose from the purchase of Kiwi Income Properties Limited and a property management business by CFSI. This goodwillis tested for impairment based on value-in-use calculations. These calculations use cash flow projections for the CFSI's underlying assetsbased on the financial budgets approved by management covering a 5 year period. Cash flows beyond 5 years are extrapolated based on pastperformance and management's expectations for the future.

PACNZ Pension Scheme Sovereign Staff Retirement Fund

Life Group

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 actuarial review of the scheme was 30 June 2007.

The Prudential Assurance Co NZ Ltd Pension Scheme (PACNZ) is a defined benefit plan with only pensioners in payment now remaining in thescheme. The date of the last actuarial review of the scheme was 31 March 2007.

The next tri-annual actuarial review of both schemes is scheduled for 31 March 2010.

33



20 Other Assets (continued)

20a Retirement Benefit Obligations (continued)

Income / (Expense) Recognised in the Income Statement

Interest Cost - - - - - (1)Expected Return on Assets - - - - - 1 Recognised Actuarial Gain / (Loss) - - 1 - - (1)Adjustment for Limit on the Use of Net Assets - - - - - - Superannuation Income / (Expense) - - 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 Period* - (1) (1) 1 2 2 Net Income / (Expense) Recognised in the Income Statement - - 1 - - (1)Net (Liability) / Asset at End of Year* - (1) - 1 2 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 n/a 19% 19% 19%Global Shares n/a n/a n/a 40% 41% 40%Global Fixed Interest 100% 100% 100% 36% 35% 36%Cash n/a n/a n/a 5% 5% 5%

Fair Value of Fund Assets

Discount Rate (before tax and expenses) 6.40% pa 5.90%pa 6.40% pa 6.43% pa 6.87%pa 6.43% paExpected Return on Fund Assets 6.40% pa 5.90%pa 6.40% pa 7.86% pa 6.02%pa 7.86% paRate of increase in Salaries n/a n/a n/a 3.50% pa 3.50%pa 3.50% paRate of increase in Pensions 2.50% pa 2.50%pa 2.50% pa 2.50% pa 2.50%pa 2.50% pa

Additional salary increases in respect of promotion are assumed.

Historical Information

$ millions Unaudited Audited Audited Audited For the period ended 31-Dec-08 30-Jun-08 30-Jun-07 30-Jun-06

6 months 12 months 12 months 12 months

PACNZ Pension Scheme

Present Value of Funded Obligations (4) (4) (5) (6) Fair Value of Fund Assets 4 4 4 5 Fund Deficit - - (1) (1)

Assumptions Change on Fund Liabilities - Gain - 1 - -

Sovereign Staff Retirement Fund

Present Value of Funded Obligations (5) (5) (5) (6) Fair Value of Fund Assets 10 10 10 10 Fund Surplus 5 5 5 4

Assumptions Change on Fund Liabilities - (Loss) / Gain - - (1) 1

Sovereign Staff Retirement Fund PACNZ Pension Scheme

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 targetallocation of assets to each asset class. The returns used for each asset class are net of investment tax and all expense.

34




21 Life Insurance Contract Liabilities and Life Investment Contracts

Life Insurance Contract Liabilities

Opening Life Insurance Contract Liabilities 746 924 924 Maturities and Surrenders 8 (1) (10) (15)Recognised in Income Statement* (162) (41) (163)Closing Life Insurance Contract Liabilities 583 873 746

Life Insurance Contract LiabilitiesExpected to be Realised Within 12 Months (64) (45) (52)Expected to be Realised in more than 12 Months 647 918 798

583 873 746

Life Insurance Contract Liabilities - Recognised in Income Statement (162) ( 41) (163)Increase in Reinsurance Assets - Recognised in Income Statement 22 (3) (1) (1)Decrease in Deposited Reserves - Recognised in Income Statement 22 - (2) (4)Net Change in Life Insurance Contract Liabilities (165) (44) (168)

Life Insurance Contracts with a Discretionary Participation Feature - the amount of the liabilities that relates to guarantees 656 633 625 Investment Linked Contracts - the amount of the liabilities subject to investment performance guarantees 11 18 13 Other Contracts with a Fixed or Guaranteed Termination Value - current termination value - 1 -

Life Insurance Contract Liabilities contain the following components:

Future Policy Benefits 5,443 3,516 4,473 Future Bonuses 188 341 288 Future Expenses 1,724 1,158 1,437 Future Planned Margins of Revenues over Expenses 1,007 769 853 Future Premiums (7,579) (4,795) (6,158)Unvested Policyholder Benefits 52 63 58 Deferred Taxation Liability (252) (179) (205)

583 873 746

Life Investment Contracts

Opening Life Investment Contracts 1,112 1,298 1,298 Deposit Premium 4 40 52 102 Maturities and Surrenders 8 (111) (96) (192)Recognised in Income Statement (102) (15) (96)Closing Life Investment Contracts 939 1,239 1,112

Opening Deferred Income Reserve 74 82 82 Recognised in Income Statement (4) (5) (8)Closing Deferred Income Reserve 70 77 74

1,009 1,316 1,186

Life Investment ContractsExpected to be Realised Within 12 Months 31 60 41 Expected to be Realised in more than 12 Months 978 1,256 1,145

1,009 1,316 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 areincluded in Note 22.

The impact on the fair value of Life Investment Contracts due to changes in credit risk is Nil (31 December 2007 Nil, 30 June 2008 Nil).

35




22 Reinsurance Assets and Liabilities

Liabilities ceded under ReinsuranceBalance at Beginning of Period 60 59 59 Increase in Reinsurance Assets recognised in Net Change in Life Insurance Liabilities reported in the Income Statement 21 3 1 1 Balance at End of Period 63 60 60

Deposited Reserves (Life Insurance Component)Balance at Beginning of Period 40 44 44 Decrease in Deposited Reserves recognised in Net Change in Life Insurance Liabilities reported in the Income Statement 21 - (2) (4)Balance at End of Period 38 40 42 40

23 Deferred Taxation Liability

Balance at Beginning of Period 103 70 70 Less: Deferred Taxation Balance of Discontinued Operations 5 - - Taxation Expense recognised in the Income Statement 11 20 4 33 Total Deferred Taxation Liability 128 74 103

Deferred Taxation relates to:Depreciation (2) (2) (6)Holiday Pay (1) (1) (1)Provision for Bonuses - (2) - Provision for Premiums Paid in Advance 1 1 3 Deferred Acquisition Costs and Other Intangible Assets 7 8 8 Deferred Taxation on Life Insurance Contract Liabilities and Life Investment Contracts 231 156 183 Unrealised (Loss) / Gain of Investments (18) 3 (12)Unamortised Convertible Notes and Related Derivative Financial Instruments (121) (114) (101)Accrued Expenses and Provisions 31 25 29 Total Deferred Taxation Liability 1A 128 74 103

Deferred Taxation recognised in the Income Statement:Provision for Impairment Loss - 1 1 Depreciation (1) - (4)Provision for Bonuses - 1 3 Provision for Premiums Paid in Advance (2) - 2 Deferred Acquisition Costs and Other Intangible Assets (1) (1) (1)Deferred Taxation on Life Insurance Contract Liabilities and Life Investment Contracts 48 12 39 Increase in Unrealised Investment Losses / Decrease in Unrealised Gains (6) (17) (32)Amortisation of Convertible Notes and Increase in Unrealised Gains on Related Derivative Financial Instruments (20) 7 20 Accrued Expenses and Provisions 2 1 5 Total Deferred Taxation recognised in the Income Statement 11 20 4 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$199m (31 December 2007 $168m, 30 June 2008 $168m). The Deferred Tax Benefit on Convertible Notes settled after more than 12 monthsis $107m (31 December 2007 $104m, 30 June 2008 $104m).

On issuance of the Convertible Notes, a Deferred Tax Asset (NZD $135m) was created to recognise the future benefit of the debt componentof 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 TaxAsset will reduce and be amortised as a current tax benefit as the debt component reduces. An amount of $15m will be amortised in the next12 months, and the balance has been restated to reflect the 3% tax rate change. The 31 December 2008 value remaining in Deferred Tax is$110m (31 December 2007 $104m, 30 June 2008 $122m).

36




24 Borrowings

Current portion 48 29 30 Non-current portion 318 349 377

38 366 378 407

25 Trade and Other Payables

Trade Accounts Payable 25a 57 51 58 Sundry Creditors and Accruals 25b 21 33 47 Amounts Due to Related Parties 32 5 8 9 Employee Entitlements 11 14 17 Deferred Fees 25c 14 16 15 Dividends Payable 6 7 7 Total Trade and Other Payables 1A, 38 114 129 153

25a Trade Accounts PayableAgent Balances 2 2 2 Deposits Held for Unissued Policies 12 13 15 Outstanding Claims 39 35 40 Amounts Due to Reinsurers 4 1 1

57 51 58

25b Sundry Creditors and AccrualsExpense Creditors 13 22 24 Interest Payable 6 8 8 Investment Creditors 2 3 15

21 33 47

25c

26 Provisions

Information Systems 26a - 2 1 Systems Upgrade 26c - - 5 Total Provisions 1A - 2 6

Current portion - 2 6 - 2 6

26a Information Systems Balance at Beginning of Period 1 2 2 Less: Amounts Written Back Unused 1 - 1 Balance at End of Period - 2 1

Life Group

The fees are to compensate the Life Group for additional costs to be incurred over the terms of the restructuring arrangements and areproportionately rebatable if the related debt is assigned or novated prior to the contracted maturity. The fees have been deferred andamortised over the contractual terms of the relevant arrangement on a basis that closely matches a notional effective interest rate.

Fees were received as part of the funding restructure which incorporated the issuing of the Convertible Notes (refer to Note 24).

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 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 plus a margin. The MCNs will be perpetual securities and will only be repaid if they are redeemed by ASBGL.

This provision is for anticipated expenses relating to the alignment of multiple business systems and processes.

There have been no defaults on payments of interest or principal during the period ending 31 December 2008 (31 December 2007 Nil, 30 June2008 Nil).

37




26 Provisions (continued)

26b Marketing CostsBalance at Beginning of Period - 2 2 Less: Costs Incurred - 2 2 Balance at End of Period - - -

26c Systems UpgradeBalance at Beginning of Period 5 - - Additional Provided - - 5 Less: Provisions for Discontinued Operations 5 - - Balance at End of Period - - 5

27 Contributed Capital - Ordinary Shareholder

Issued Ordinary Share CapitalBalance at Beginning of Year - 5 5 Repayment of Capital - - (5)Balance at End of Year - 5 -

28 Contributed Capital - Convertible Notes

Convertible NotesBalance at Beginning of Year 503 503 503 Balance at End of Year 503 503 503

29 Retained Earnings

Balance at Beginning of Period 115 31 31 Net Profit after Taxation 1A, 3 49 51 103 Branch Profit Repatriated (13) (14) (28)Taxation on Branch Profit Repatriated 11 4 5 9 Balance at End of Period 155 73 115

30 Head Office Contribution

Balance at Beginning of Period 300 300 300 Balance at End of Period 300 300 300

31 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 comply at all times with the solvency requirements set out in the "New Zealand Society of Actuaries ProfessionalStandard No. 5 Solvency Reserving for Life Insurance Business" (PS5);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 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 period ended 31 December 2008.

On 30 June 2008 Colonial First State Investment Managers (NZ) Limited repaid 4,999,999 shares to its parent company. 1 fully paid Ordinary Share remained on issue.

The provision was for committed marketing costs relating to initiation of Kiwisaver scheme.

The provision was held for ASB Group Investments Limited, which was sold to ASB Bank Limited on July 2008.

On 10 October 2006 ASBGL issued Convertible Notes of which the key terms are disclosed in Note 24. 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.

Share Capital includes 100 ordinary shares paid to $1.00 and 10,000,000 unpaid ordinary shares in ASBGL and CMLA (31 December 2007100 ordinary shares paid to $1.00 and 10,000,000 unpaid ordinary shares, 30 June 2008 100 ordinary shares paid to $1.00 and 10,000,000unpaid ordinary shares) and 200,000 fully paid Ordinary Shares in Colonial First State Investment (NZ) Limited (31 December 2007 200,000fully paid Ordinary Shares, 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



31 Capital Management (continued)

The target surplus as at 31 December 2008 was $95m (31 December 2007 $95m, 30 June 2008 $95m).

The solvency position of the life insurance entities is as follows:

Sovereign Assurance Company LimitedEquity of Shareholder 554 444 498 Less: Equity retained for solvency purposes 456 348 401 Equity Available for Distribution 98 96 97

The Colonial Mutual Life Assurance Society Limited - New Zealand BranchEquity of Shareholder 33 30 31 Less: Equity retained for solvency purposes 15 14 13 Equity available for Distribution 18 16 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 the previous period. The margins are unchanged from previous period.

(b)

(c)

(d)

(e)

(f)

(g)

CFSI and CFSIM

CHC

CHC considers the Head Office Contribution from CHC Ltd to be capital for management purposes. CHC has no externally imposed capitalrequirements. CHC's objectives when managing capital are to safeguard CHC's ability to continue as a going concern in order to providereturns to Head Office and benefits to other stakeholders. There have been no material changes in CHC's management of capital during theperiod ended 31 December 2008.

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 twelve months.

Investment Earnings: the valuation discount rates as set out in Note 2 (a) were used, but with a maximum of the mid swap rate.

Investment Earnings: the valuation discount rates as set out in Note 2 (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 levelsand limits. Minimum capital levels are set based on maintaining a target surplus in excess of that required by PS5. The level of target surplustakes account of management assessments of actual risk and forecasts / stress testing of future capital requirements. Capital is defined as theShareholder 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 imposed capitalrequirements. The respective Directors of CFSI and CFS Investment Managers (NZ) Ltd are ultimately responsible for the management ofcapital. CFSIs objectives when managing capital are to safeguard CFSI's ability to continue as a going concern in order to provide returns tothe shareholder and benefits to other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. There have beenno material changes in CFSI's management of capital during the period ended 31 December 2008.

39


32 Related Party Transactions and BalancesBanking GroupAnnuity Investment

Cash and Deposits

Securities

Derivative Transactions

Expenses and Services

Insurance Commissions

Funds Management

Mortgages

Taxation

Other Fellow CBA SubsidiariesBorrowings & Hedging

Securities

Investment Management

Transactions with Parent Company (CBA)

The Life Group has an annuity investment with the Banking Group (refer to Note 13). During the period the Life Group received interestincome of nil (31 December 2007 Nil, 30 June 2008 $1m).

The Life Group paid the Banking Group $9m (31 December 2007 $11m, 30 June 2008 $23m) for the provision of services. Services includedhuman resources, legal, internal audit, property management, strategic research, finance, executive, computer leasing and informationtechnology support.

The Life Group received $7m (31 December 2007 $7m, 30 June 2008 $13m) from the Banking Group for the recovery of costs relating to theorigination 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 $1,164m as at 31 December 2007 and $776m as at 30 June 2008. There were net unrealised gains on the contracts of$24m as at 31 December 2007 and 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 $1,672m (31 December 2007 $1,505m, 30June 2008 $1,383m) and interest rate swaps with a face value of $1,027m (31 December 2007 $1,027m, 30 June 2008 $1,027m). There arenet unrealised losses on these contracts of $38m (31 December 2007 gains $33m, 30 June 2008 losses of $14m). The Life Group receivedinterest income of $1m (31 December 2007 $5m, 30 June 2008 $10m) from interest rate swaps with the Banking Group.

The Life Group holds Securities issued by the Banking Group of $33m (31 December 2007 $6m, 30 June 2008 $34m). The Life Groupreceived interest income on Securities issued by the Banking Group of $Nil (31 December 2007 Nil, 30 June 2008 Nil). The Life Group holdsSecurities issued by Trusts managed by the Banking Group of $57m (31 December 2007 $134m, 30 June 2008 $120m). The Life Groupreceived interest and dividends on Securities issued by these Trusts of $1m (31 December 2007 $12m, 30 June 2008 $13m).

Prior to 1 July 2008 the Life Group made payments to the Banking Group for the distribution of fund management products. For the periodended 31 December 2007, receipts of $5m (30 June 2008 $9m) were received from the NZ Mortgage Income Fund of which $5m (30 June2008 $8m) were paid to the Banking Group. Payments of $2m (30 June 2008 $5m) were made to the Banking Group for the distribution of fundmanagement products for the period ended 31 December 2007. The Life Group received $1m (31 December 2007 Nil, 30 June 2008 Nil) fromthe Banking Group for the distribution of fund management products.

There were no net payments (31 December 2007 $12m, 30 June 2008 $22m) to the Banking Group, relating to the utilisation of tax relateditems.

The Life Group holds Securities issued by other fellow CBA subsidiaries of $22m (31 December 2007 $25m, 30 June 2008 $26m). The LifeGroup received interest and dividends on Securities issued by other fellow CBA subsidiaries of $1m (31 December 2007 $1m, 30 June 2008$1m).

The Life Group did not repay any borrowings to The Colonial Mutual Life Assurance Society Limited (31 December 2007 Nil, 30 June 2008 Nil)and did not incur any interest for the period ended 31 December 2008 (31 December 2007 Nil, 30 June 2008 Nil).

The Life Group paid Nil (31 December 2007 $1m, 30 June 2008 $2m) to First State Investment Management (UK) Limited for the provision ofinvestment management services.

The Life Group paid Nil (31 December 2007 $1m, 30 June 2008 $1m) to Colonial First State Investments Limited for the provision ofinvestment management services.

The Life Group received no fees in the period ending 31 December 2008 from Colonial Holding Company Limited (31 December 2007 Nil, 30June 2008 Nil) and The Colonial Mutual Life Assurance Society Limited (31 December 2007 Nil, 30 June 2008 Nil), in relation to debtrestructuring arrangements (refer to Note 25). As at 31 December 2008 $14m (31 December 2007 $16m, 30 June 2008 $15m) of these feesremains deferred and will be amortised over the remaining term of the arrangement.

The Life Group has CBA Equity Securities of $3m (31 December 2007 $8m, 30 June 2008 $9m) and received net income on CBA EquitySecurities during the period of Nil (31 December 2007 $1m, 30 June 2008 Nil).

The Life Group has cash balances and deposits of $571m with the Banking Group (31 December 2007 $575m, 30 June 2008 $537m). TheLife Group received interest income on these deposits of $21m (31 December 2007 $22m, 30 June 2008 $45m). These deposits are held onnormal commercial terms and conditions. Prior to 1 July 2008 the Life Group managed and administered a number of Superannuation, Unit andother Trusts. These trusts held some of their funds with the Banking Group. Total deposits held with the Banking Group as at 31 December2007 $976m and $1,073m as at 30 June 2008. Interest income was received on Trust deposits of $47m for the period ended 31 December2007 and $94m for the year ended 30 June 2008.

The Life Group has paid insurance commissions of $16m to the Banking Group (31 December 2007 $9m, 30 June 2008 $24m).

Investment ManagementThe Life Group paid $7m (31 December 2007 Nil, 30 June 2008 Nil) to the Banking Group for the provision of investment management.

40



32 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 (5) (6) (8)Colonial First State Investments Limited - (1) 1 First State Investment Management (UK) Limited - (1) (1)

Balances with Trusts Administered and Managed by the GroupComplete Investor Plan Super 3 7 3 ASB Unit Trusts - 2 2

(2) 1 (3)Disclosed as follows:Amounts Due to Related Parties 25 (5) (8) (9)Amounts Due from Related Parties 19 3 9 6

(2) 1 (3)

33 Directors and Key Management Personnel

Key Management Compensation Short Term Employee Benefits 2 3 10

The Life Group has no other transactions or balances with Key Management Personnel.

34 Leasing Commitments

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

Within One Year 5 4 5 Between One and Two Years 4 5 5 Between Two and Five Years 11 14 14 Over Five Years 51 59 54 Total Leasing Commitments 71 82 78

35 Contingent Liabilities and Capital Commitments

Contingent Liabilities

Capital Commitments

There are no other material contingent liabilities as at 31 December 2008 (31 December 2007 Nil, 30 June 2008 Nil).

There are no capital commitments as at 31 December 2008 (31 December 2007 $2m, 30 June 2008 $1m).

Should the IRD issue reassessments to SACL in respect of the reinsurance arrangements for all relevant tax years and should SACL notsucceed in challenging these assessments in Court, the estimated maximum potential additional tax liability including use of money interest andexcluding penalties would be $60m as at 31 December 2008 (31 December 2007 $95m, 30 June 2008 $49m). The reduction in estimatedliability since 31 December 2007 has arisen as a result of the IRD finding in favour of SACL on certain aspects of the dispute. The increase inthe liability since 30 June 2008 is due to additional arguments raised by the IRD in relation to 2003 and later years.

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 lease is being accounted for ona straight line basis over its full term. The Life Group has a number of other properties under operating leases. The leases have a variety oflease periods and a number of the leases contain options to renew.

On 30 September 2005, SACL received a reassessment from the Inland Revenue Department (IRD) in relation to the tax treatment ofreinsurance arrangements in the 2000 tax year. SACL subsequently received reassessments in respect of the arrangements for the 2001 and2002 tax years in March 2008. Based on independent tax and legal advice, SACL has lodged proceedings in the High Court to challenge thesereassessments. On 20 October 2008, the IRD issued a Statement of Position for the 2003 and 2004 years on broadly the same basis adoptedin respect of the previous years with the exception of new arguments raised in relation to one of the issues in dispute. SACL issued itsstatement of response on 19 December 2008.

SACL is confident the tax treatment it has adopted for the transactions to which the assessment relates is correct. SACL has consistentlyapplied this tax treatment to its reinsurance arrangements since inception of the arrangements (1992 and 1996) and that tax treatment hasbeen reviewed by the IRD under previous IRD audits.

In the previous year, Subsidiaries of the Life Group acted as fund managers for superannuation schemes, property investment schemes andinvestment funds, the detail of which have been disclosed in Note 36.

Refer to Note 16 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 period. The balances are settled on a regular basis. The amounts due to / (from) the LifeGroup by / (to) related parties are as follows:

41


LifeInsurance and Asset

$ millions Investment Management Other Total

36 Financial Reporting by Segments

Primary Segment Information - Business

Operating Income Derived from Outside Life Group 81 - 12 93 Total Operating Income 81 - 12 93 Net Profit before Taxation (8) - 6 (2)

Tax Assets 90 - - 90 External Non Tax Assets 3,119 - 77 3,196 Total External Assets 3,209 - 77 3,286

Assets Under Management (Not Consolidated) 1,805 - 2,040 3,845 Assets Under Administration (Not Consolidated) 4,800 - - 4,800

Tax Liabilities 129 - (1) 128 External Non Tax Liabilities 2,194 - 6 2,200 Total External Liabilities 2,323 - 5 2,328

Acquisition of Property, Plant & Equipment, Intangible Assets, & Other Non-current Assets 3 - - 3 Depreciation & Amortisation Expense 4 - - 4

Unaudited

Operating Income Derived from Outside Life Group 327 33 14 374 Inter-Segment Operating Income 9 (9) - - Total Operating Income 336 24 14 374 Net Profit before Taxation 64 - 8 72

Tax Assets 18 1 - 19 External Non Tax Assets 3,565 38 79 3,682 Total Assets 3,583 39 79 3,701

Assets Under Management (Not Consolidated) 1,653 1,189 1,933 4,775 Assets Under Administration (Not Consolidated) 4,878 4,840 - 9,718

Tax Liabilities 76 - (2) 74 External Non Tax Liabilities 2,729 9 8 2,746 Inter-segment Liabilities (7) 7 - - Total Liabilities 2,798 16 6 2,820 Acquisition of Property Plant & Equipment, Intangible Assets, & Other Non-current Assets 7 6 - 13 Depreciation & Amortisation Expense 3 - - 3

Audited

Operating Income Derived from Outside Life Group 518 62 25 605 Inter-Segment Operating Income - (15) - (15)Total Operating Income 518 47 25 590 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) 1,616 929 2,066 4,611 Assets Under Administration (Not Consolidated) 4,664 4,541 - 9,205

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: marketing and administration of a comprehensive range of life insurance andsuperannuation products.


Life Group

As at 30 June 2008


42



36 Financial Reporting by Segments (continued)

Asset Management:

Other:

Secondary Segment Information - Geographical

37 Interest Rate Summary

Assets:Government Stock 2.5% 3.8% 4.1%Corporate Bonds 5.1% 4.6% 6.0%Mortgages 8.5% 7.3% 8.5%Loans on Policies 10.0% 10.0% 10.0%Annuity Investment 13.4% 13.4% 13.4%

Liabilities:Borrowings 5.5% 8.2% 8.7%

38 Fair Value of Financial Instruments not Carried at Fair Value

$ millions Carrying FairNote Amount Value


Cash & Cash Equivalents 14 584 584 Trade and Other Receivables 19 57 57

Borrowings 24 366 301 Deposited Reserves 22 40 40 Trade and Other Payables 25 114 114







Life Group

The Life Group operates predominantly in the insurance industry within New Zealand. The Life Group has very limited exposure to risksassociated with operating in different economic environments or political conditions. On this basis no geographical segment information isprovided.

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 31 December 2008 is $119m (31December 2007 $134m, 30 June 2008 $134m). Due to the unknown nature of the out workings of such a discretion, the fair value of thediscretionary participation feature cannot be reliably measured.

Information about maturity of interest bearing financial assets and liabilities is disclosed elsewhere in these financial statements (refer to Notes13 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:

marketing and administration of unit trusts and provision of asset administration services to financial advisers and fellow Life Group subsidiaries.

The Life Group conducts managed fund and trust activities. These are superannuation scheme management, securitised mortgage activities, trust management and asset administration. The amount of assets related to these activities not consolidated is disclosed within the segmental information. Arrangements exist to ensure these activities are managed independently from the Life Group's other activities.

the other segment comprise other operations, none of which constitutes a seperately reportable segment.

43



39 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 :

Unaudited Unaudited Audited Unaudited Unaudited AuditedRatings 31-Dec-08 31-Dec-07 30-Jun-08 31-Dec-08 31-Dec-07 30-Jun-08

AAA 68 89 84 622 469 450 AA+ 1 2 2 - - 18 AA 12 8 24 117 85 48 AA- 23 33 21 57 64 97 A+ 13 14 7 23 46 50 A - 4 - 3 12 5 Equity Securities 332 476 401 171 341 305 Managed Funds 278 432 397 39 181 166 Other Securities - - - 37 39 38

727 1,058 936 1,069 1,237 1,177

Derivative Financial Instruments

Amounts Due from Reinsurers

The S&P credit ratings for the Life Group's major reinsurers (unchanged from 30 June 2007) are :

General Reinsurance Life Australia Limited AAAAssicurazioni Generali S.p.A. AARGA Reinsurance Company AA-Swiss Re Life and Health (Australia) Limited AA-Munich Reinsurance Company of Australasia Limited AA-

The counterparty for the majority of the Life Group's Derivative Financial Instruments is ASB Bank Limited, which has an S&P credit rating ofAA, except for the foreign currency interest rate swap where the counterparty is Deutsche Bank AG which also has an S&P credit rating of AA.

Included in 'Other Securities' are Mortgages, which are fully secured against property, and Loans on Policies, which are fully secured againstcustomer life investment policies. Credit ratings are not provided for equity securities and managed funds because ratings are either notavailable 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 externalrecovery or legal action. The amount of interest income accrued on Impaired Assets during the period was Nil (31 December 2007 Nil, 30 June2008 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 or more days overdue.

The Life Group's cash holdings are with ASB Bank Limited, which has a Standard and Poor ("S&P") credit rating of AA, and Citigroup Inc.which has an S&P rating of AA-.

Life Group

44


40 Provisions for Impairment Loss


Specific Provisions Balance at Beginning of Period 1 1 1 Balance at End of Period 1 1 1

Total Impairment Provisions 1 1 1

41 Disaggregated Information

Investment Non-InvestmentLinked Linked

$ millions Policies Policies Total

For the period ended 31 December 2008Unaudited

Investments 1,001 1,448 2,449 Reinsured Life Insurance Contracts - 63 63 Other Assets 64 710 774 Liabilities other than Policy Liabilities 56 680 736 Policy Liabilities 1,009 583 1,592 Shareholder's Retained Earnings - 155 155

Premium Income - 252 252 Investment Income (107) (24) (131)Claims Expense - 163 163 Commission and Management Expenses 11 128 139 Investment Income allocated to Policyholders (107) (52) (159)Net Profit before Taxation (10) 8 (2)Net Profit after Taxation 6 (5) 1

For the period ended 31 December 2007Unaudited

Investments 1,255 1,659 2,914 Reinsured Life Insurance Contracts - 60 60 Other Assets 104 623 727 Liabilities other than Policy Liabilities 42 589 631 Policy Liabilities 1,316 873 2,189 Shareholder's Retained Earnings 1 72 73

Premium Income - 223 223 Investment Income 10 60 70 Claims Expense - 157 157 Commission and Management Expenses 14 134 148 Investment Income allocated to Policyholders 10 31 41 Net Profit before Taxation 10 62 72 Net Profit after Taxation 6 45 51

For the year ended 30 June 2008Audited

Investments 1,106 1,651 2,757 Reinsured Life Insurance Contracts - 60 60 Other Assets 85 682 767 Liabilities other than Policy Liabilities 5 729 734 Policy Liabilities 1,186 746 1,932

Shareholder's Retained Earnings - 115 115

Premium Income - 448 448 Investment Income (59) 37 (22)Claims Expense - 299 299 Commission and Management Expenses 28 286 314 Investment Income allocated to Policyholders (62) (19) (81)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 forcategories shown below. As there are no legal requirements to maintain separate life insurance funds, the Life Group does not maintain recordsthat provide all the information required by NZ IFRS 4. Accordingly determination of the disaggregated information presented below requires theuse 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 tolegal action or external recovery. The Life Group does not hold any Collective Provisions for impairment.

Life Group

45


42 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 andinsurance liabilities. Risk management policies focus on ensuring cash flows from assets are sufficient to fund obligations arising frominsurance 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 Risk Committees. TheBoard Risk Committees comprise members of the Board of Directors and are chaired by the respective Chairmen of the Boards.Implementation of risk management strategy is the responsibility of the Managing Director of Sovereign Assurance Company Limited.

ASBGL and CMLA have management structures and information systems to manage individual risks, have separated risk initiation andmonitoring tasks where feasible, and subject all material systems to regular internal audit. Periodic reviews of all risk management systems areundertaken 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 ContractLiabilities 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 actuarialassumptions 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 diseasesor epidemics. In addition, in the case of morbidity, the time to recovery may be longer than assumed. Insurance risk is controlled by ensuringunderwriting standards adequately identify potential risk, retaining the right to amend premiums on risk policies where appropriate and throughthe 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 reinsuranceprogramme 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 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 arecaused 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 15).

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 investmentsamounted to 63% (31 December 2007 64%, 30 June 2008 64%) of total investments. The market value of these investments is thereforeaffected by movements in the New Zealand dollar relative to the currency in which the investment is denominated. ASBGL and CMLA alsoholds foreign currencies on short term deposit.

Foreign exchange contracts are used to hedge approximately 80% of currency risk (31 December 2007 72%, 30 June 2008 74%). All equityfund investments denominated in foreign currency are 50% hedged (31 December 2007 50%, 30 June 2008 50%). All fixed interest fundinvestments denominated in foreign currency are 100% hedged (31 December 2007 100%, 30 June 2008 100%).

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 ininvestment returns in cash and fixed interest securities, and reinsurer payment obligations. Credit risk also arises from a mortgage portfolio,loans to agents, foreign exchange contracts, loans made using policies as security; and trade receivables (policyholder premium debtors, agentbalances 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 includinginterest rates, foreign currencies, equities, and derivative instruments. For each distinct category of liabilities, a separate portfolio of assets ismaintained 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 CMLAearn 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 anappropriate 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 LiabilityManagement Committee (ALCO) of ASBGL which also has responsibility for CMLA. Some criteria are referred to the Risk Committee of ASBGLfor approval. Guidelines and limits are set for security credit ratings and aggregate exposure to any single counterparty or geographic region(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 thePolicyholder. 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 readilytradable 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 offunds 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 mandatesare set by ALCO for the investment of shareholder's funds. As at 31 December 2008, shareholder's funds in ASBGL and CMLA were invested1% in growth assets (shares and property) and 99% 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 fromchanges in interest rates and equity values (refer to Note 44).

47



Interest Rate Risk

Equity Risk

Internal Audit

CFSI

Credit Risk

Concentrations of Credit risk

Interest Rate Risk

Liquidity Risk

The primary risks facing CFSI 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 acentralised audit function which covers ASB Bank Limited, ASB Group (Life) Limited consolidated entities and CMLA.

Internal Audit provides an assurance and consulting service, independent of the management of the respective companies designed to assistASBGL and CMLA in achieving their objectives by bringing a systematic and disciplined approach to improving the effectiveness of riskmanagement systems, the framework of controls, and governance processes. Operational, compliance, financial and systems audits of allareas of the ASBGL and CMLA operations are undertaken based on an assessment of risk. The independent Internal Audit function is ultimatelyaccountable to the Board of Directors of ASBGL through the Managing Director and Board Audit Committee.

The Board Audit Committees of ASBGL and CMLA meet on a regular basis to consider financial reporting, internal control and corporategovernance issues. They review the interim and annual financial statements, the activities of the internal and external auditors and monitor therelationship between management and the external auditors.

Liquidity risk is the risk that CFSI will encounter difficulty raising liquid fund to meet commitments as they fall due. CFSI evaluates its liquidityrequirements on an ongoing basis. In general sufficient cash flows are generated from operating activities to meet obligations arising fromfinancial liabilities. In the event that a shortfall arises, CFSI may draw on funds from related parties.

CFSI has no off-balance sheet financial instruments, and does 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 arealso 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 tomatch 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 atcurrent risk free interest rates.

To the extent CFSI has a receivable from another party, there is credit risk in the event of non-performance by that party. Financial instrumentswhich potentially subject CFSI to credit risk, principally consist of cash and cash equivalents, advances to related entities, accounts receivableand other financial assets.

CFSI's maximum exposure to credit risk is equal to the carrying amount of these instruments.

CFSI has placed all cash and cash equivalents with ASB Bank Limited. All advances to related entities are with entities in the CBA group.

CFSI'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 instrumentsand the value of Life Insurance Contract Liabilities. Interest rate risk arises from the structure and characteristics of the assets, liabilities andequity, and in the mismatch in cash flows of assets and liabilities. The objective is to manage the interest rate risk to achieve stable andsustainable 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 thepolicyholder. For assets that do not relate to investment linked contracts, the shareholder has exposure to equity risk either directly or due toperformance 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 reportingperiod and in future years. Cash flow interest rate risk arises on floating rate borrowings and ASBGL and CMLA's mortgage portfolio which ispriced on a variable interest rate regime. Management regularly reviews the mortgage portfolio interest rates to ensure they are in line withmarket 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 andliabilities through buying and selling long term securities and through the use of interest rate swaps to mitigate the interest rate risk on ASBGLand CMLA's floating rate borrowing.

Overall strategic direction is provided by ALCO, which meets monthly.

48


43 Events After Balance Date

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


Result of Change in Assumptions

Market RisksIncrease in Interest Rates of 1% (41) (30) (30) (9) (9) (11) (11)Decrease in Interest Rates of 1% 41 30 30 9 9 11 11 Equity Values Increase by 10% 56 56 56 - - - - Equity Values Decrease by 10% (56) (56) (56) - - - - Favourable Movement in Foreign Exchange Rates of 10% 33 33 33 - - - - Adverse Movement in Foreign Exchange Rates of 10% (33) (33) (33) - - - -

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% - (7) (6) 7 6 7 7 Worsening of Morbidity by 10% - 7 6 (7) (6) (7) (7)Change in Discontinuance by 20% - - - - - - -

CFSI and CHC

A sensitivity analysis has not been disclosed for CFSI and CHC as neither entity has a material exposure to market risk.

For insurance contracts, providing death benefits increased, greater mortality rates would lead to higher levels of claimsoccurring 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 reducelife insurance contract liabilities.

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 foreignexchange 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'sequity.

Depending on the profile of the investment portfolio, investment income will decrease as interest rates decrease. This maybe offset to an extent by changes in the market value of fixed interest investments. The impact on profit and shareholder'sequity depends on the relative profiles of assets and liabilities, to the extent that these are not matched.

There have been no material events after balance date.

Impact of movement in underlying variable

The impact of the discontinuance rate assumption depends on a range of factors including the type of contract, thesurrender value basis (where applicable) and the duration in force. For example, an increase in discontinuance rates atearlier durations of life insurance contracts usually has a negative effect on performance and net assets. However, due tothe interplay between the factors, there is not always an adverse outcome from an increase in discontinuance rates.

Effect on Liabilities Profit / (Loss) and Equity

Life Group

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. The information presented below is net of tax.

For investment contracts and life insurance contracts with discretionary participation features, liabilities depend on thevalue of underlying assets. Market risk may be entirely borne by policyholders. However, ASBGL and CMLA derive feeincome based on the value of the underlying funds; hence revenues are always sensitive to changes in market value. Forassets which are not contractually linked to policy liabilities, ASBGL and CMLA are exposed to market risk.

Equity

The cost of health-related claims depends on both the incidence of policyholders becoming ill and the duration which theyremain ill. Higher than expected incidence and duration would be likely to increase claim costs, reducing profit andshareholders’ equity.

49


44 Sensitivity Analysis (continued)

Effect on Assets

$ millionsGross of

ReinsuranceNet of

ReinsuranceGross of

ReinsuranceNet of

ReinsuranceGross of

ReinsuranceNet of

ReinsuranceAs at 31 December 2007Unaudited


Market RisksIncrease in Interest Rates of 1% (36) (23) (23) (11) (11) (13) (13)Decrease in Interest Rates of 1% 36 23 23 11 11 13 13 Equity Values Increase by 10% 81 81 81 - - - - Equity Values Decrease by 10% (81) (81) (81) - - - - Favourable Movement in Foreign Exchange

33 33 33 - - - - Adverse Movement in Foreign Exchange Rates of 10% (33) (33) (33) - - - -

Insurance RisksIncrease in Expenses of 10% - 1 1 (1) (1) (1) (1)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% (7) (6) 7 6 7 6 Worsening of Morbidity by 10% - 7 6 (7) (6) (7) (6)Change in Discontinuance by 20% - - - - - - -



Market RisksIncrease in Interest Rates of 1% (33) (19) (19) (14) (14) (14) (14)Decrease in Interest Rates of 1% 33 19 19 14 14 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% 34 34 34 - - - - Adverse Movement in Foreign Exchange Rates of 10% (34) (34) (34) - - - -

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

UnauditedAs at 31 December 2008

Financial AssetsCash and Cash Equivalents 1 13 1 1 - 2 Securities 444 207 100 326 329 62 Derivative Financial Instruments 22 12 8 24 2 1

Financial LiabilitiesBorrowings - (366) - - - - Derivative Financial Instruments (7) (9) - (1) (24) (1)Trade and Other Payables - (8) - - - -

Net Foreign Currency Assets / (Liabilities) 460 (151) 109 350 307 64

Derivative Financial Instruments Net Notional Principal 312 653 72 343 308 32

EquityLife Group

The table above is 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

Rates of 10%

50


45 Material Foreign Currency Balances (continued)

$ millions USD AUD GBP YEN EURO OTHER


Financial AssetsCash and Cash Equivalents 3 11 - (4) (3) 2 Securities 642 298 128 284 373 95 Derivative Financial Instruments 2 12 4 2 - -

Financial LiabilitiesBorrowings - (378) - - - - Derivative Financial Instruments - - - - (7) 1 Trade and Other Payables - (9) - - - -




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) - - - -



46 Concentrations of Credit Exposures by Geographic Region

$ millionsNew

ZealandNorth

AmericaAustralia Great

BritainAsia Europe Other Total

UnauditedAs at 31 December 2008Financial AssetsCash and Cash Equivalents 570 - - - 14 - - 584 Securities 332 362 200 105 231 544 22 1,796 Derivative Financial Instruments 57 - - - - 12 - 69 Trade and Other Receivables 53 - - - - 4 - 57

Total Credit Exposures by Geographic Region 1,012 362 200 105 245 560 22 2,506


Financial AssetsCash and Cash Equivalents 574 - - - - 13 - 587 Securities 465 387 285 139 223 757 39 2,295 Derivative Financial Instruments 32 - - - - - - 32 Trade and Other Receivables 65 - 4 - - - - 69



Financial AssetsCash and Cash Equivalents 536 - - - 34 - - 570 Securities 436 367 267 124 181 705 33 2,113 Derivative Financial Instruments 3 - - - - 71 - 74 Trade and Other Receivables 63 - 6 - - 2 - 71


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

UnauditedAs at 31 December 2008

Life Investment Contracts 703 3 13 125 367 1,211 1,009 Borrowings - 12 28 179 137 356 366 Derivative Financial Instruments 660 1,024 15 26 8 1,733 88 Deposited Reserves 40 - - - - 40 40 Trade and Other Payables 86 7 - 1 - 94 114 Total Financial Liabilities 1,489 1,046 56 331 512 3,434 1,617

Simultaneous Inflows on Derivative Financial Instruments 631 1,065 - - - 1,696 88


Life Investment Contracts 959 3 19 169 775 1,925 1,316 Borrowings - 17 49 260 260 586 378 Derivative Financial Instruments 301 845 369 37 37 1,589 6 Deposited Reserves 42 - - - - 42 42 Trade and Other Payables 98 7 - - - 105 129

Total Financial Liabilities 1,400 872 437 466 1,072 4,247 1,871

Simultaneous Inflows on Derivative Financial Instruments 310 849 356 - - 1,516 6


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 40 - - - - 40 40 Trade and Other Payables 124 5 - 2 - 131 153

Total Financial Liabilities 1,624 781 73 458 705 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, liabilitieshave been classified according to the earliest time period in which the Group may be required to pay. Cash flows on Derivative FinancialInstruments are analysed on a gross basis, unless they are settled net. Refer to Note 42 for details of how the Life Group manages liquidityrisk.

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48 Concentration of Credit Exposures by Individual Counterparties

Unaudited Unaudited Audited Unaudited Unaudited AuditedBalance Date Credit Exposure as at 31-Dec-08 31-Dec-07 30-Jun-08 31-Dec-08 31-Dec-07 30-Jun-08

Percentage of Shareholder's Equity

5 - 9 - - 1 1 1 165 - 69 - 1 1 - - - 70 - 74 1 - - - - - 75 - 79 - - - - - -

Unaudited Unaudited Audited Unaudited Unaudited Audited31-Dec-08 31-Dec-07 30-Jun-08 31-Dec-08 31-Dec-07 30-Jun-08

Percentage of Shareholder's Equity

5 - 9 - - 71 45 52 5265 - 69 - 597 562 - - - 70 - 74 651 - - - - - 75 - 79 - - - - - -

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 at31 December 2008 (31 December 2007 Nil, 30 June 2008 Nil).

Balance Date Credit Exposure as at

Only counterparties with balance date exposures exceeding 5% of Shareholder's 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 theseinstruments, not credit risk. Refer to Note 42 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.

Life GroupTotal Exposure to Banks ($ millions) Total Exposure to Non-banks ($ millions)

Life GroupNumber of Banks Number of Non-banks

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