This year ANZ reported a record net profit after tax of $3,688 million, up 16% on 2005.

This report explains how we get from our profit of $3,688 million to our dividend of 125c, and then on the following pages, we delve into our profit result in more detail.

chief financial officer's report A MESSAGE FROM PETER MARRIOTT

We make a series of adjustments to remove items like dividends on hybrid instruments which reduce the returns available to ordinary shareholders, and non-core items. These non-core items included incremental costs associated with merging our two banks in New Zealand of $26m ($52m in 2005) and non-recurring gains of $93m ($14m in 2005). By making these adjustments, we end up with what is commonly Statutory Profit - ($m) known as our 'cash' profit.

Cash profit Available to Ordinary Shareholders and Average Ordinary Share on Issue

We then divide this 'cash' profit by the average number of ordinary shares on issue over the year. The small increase in shares during the year is mainly due to shares being issued under the Dividend Re-investment Plan and various option plans. This resulted in 'cash' Earnings Per Share growth of 13.2% in 2006.

Cash Earnings Per Share and Dividend Per Share

Our policy has been to grow our dividend per share broadly in line with growth in 'cash' Earnings Per Share.

This resulted in a dividend of 125 cents, 13.6%, and a payout ratio of approximately 64%, which also allows us to fully frank the dividend for the foreseeable future.