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1 Annual Report 2015 ING Bank (Autralia) Limited ABN Suex Street, Sydney, NSW, 2000 GPO Box 4094, Sydney, NSW, 2001 Telephone: Facimile: Web: ING Bank (Autralia) Limited and it controlled entitie Annual Report 2015

2 Content CEO Year in Review CEO Year in review 3 Director Report Director report 6 Auditor declaration 8 Corporate Governance Statement Board reponibilitie 9 Financial Statement Statement of Comprehenive Income 11 Balance Sheet 12 Statement of Change in Equity 13 Cah Flow Statement 15 Note to the Financial Statement Section 1: Bai of preparation 1.1 Corporate information Bai of accounting 16 2 Significant etimate and judgement 16 Section 2: Performance 3 Operating income 18 4 Income tax expene 19 5 Segment reporting 21 Section 3: Capital and balance heet management 6 Cah and cah equivalent 22 7 Due from financial intitution 22 8 Available for ale financial aet 22 9 Derivative Loan and advance Depoit and other borrowing Proviion Debt iue Contributed equity Reerve Rik management Capital management Fair value of financial intrument 44 Section 4: Other Note 19 Share baed payment Commitment and contingencie Related party dicloure Auditor remuneration Subequent event Other accounting policie and new accounting tandard 53 Director Declaration 58 Independent Auditor Report 59 ING Bank (Autralia) Limited and it controlled entitie Annual Report

3 CEO Year in Review 2015 wa another trong year for ING Bank (Autralia) Limited ( the Group or ING DIRECT ) which continued to perform in a competitive market. Depite a challenging macro environment and increaingly tighter regulation we managed to grow our annual profit by 6% to an all-time record of $314.7 million, while delivering award winning innovation to Autralian. Through agile execution of our trategy, we managed to trike a balance between delivering a healthy return for our hareholder and fair value to our cutomer. We ended the year well poitioned to achieve ucce in Our Cutomer Delivering value to our cutomer continued to influence our deciion in 2015 a we enhanced our value propoition to encourage Autralian to chooe ING DIRECT a their main financial intitution. Following the free ATM propoition and Primary Bank Bonu launched in 2014, ING DIRECT expanded it unique reward program by offering our mortgage cutomer cahback for their loyalty. We alo focued on delivering value to our broker partner with the introduction of ING DIRECT new commiion model. Following conultation with aggregator, the model reward quality (LVR) over quantity (volume) and applie on new reidential loan with new to ING DIRECT ecurity property ettled from 1 January Our cutomer are at the heart of everything we do, o their feedback truly matter to u. We are proud that ING DIRECT maintained it market leading Net Promoter Score (+15) how likely a cutomer i to recommend u to omeone ele - extending the gap to the nearet major bank to 36 point. For our primary bank cutomer (thoe who pay their alary into an Orange Everyday account and hold another account with u) their advocacy level wa even higher: NPS reached a record level of 60, beating the previou record of 56 et in October Marketing In 2015, ING DIRECT revealed the bank new brand ambaador actor Ila Fiher alongide a new tagline: how banking can be. The campaign aimed to poition ING DIRECT a a conumer facing bank depite having no phyical branche, all the while highlighting that we are different from the ret. The effectivene of our cutomer propoition in 2015 wa recognied publically, with John Arnott (Executive Director, Cutomer) being named Chief Marketing Officer of the Year at the inaugural FST Media Banking and Technology Award in Sydney. In announcing the award judge made pecial mention of how ING DIRECT defined it purpoe and ued it to create a compelling cutomer propoition and marketing campaign. Primary Banking Relationhip In 2015, we ramped up our focu on becoming our cutomer primary bank, reulting in the increaed take up of our Orange Everyday tranaction account. Orange Everyday grew by 47% in 2015 a net growth of 127,481 account. The number of cutomer chooing u a their main financial intitution increaed by a record 60% in 2015, and we ended the year with a total of 206,263 primary bank cutomer. Depoit During 2015 we experienced a trong inflow of peronal depoit (net $1.8 billion), reflecting the ucce of our primary bank trategy. We currently hold $33.5 billion of retail depoit, which we ue to fund lending to our home loan cutomer. Reidential Mortgage Our reidential mortgage portfolio grew by $1 billion during We focued on delivering branded mortgage, growing our lending by $3.7 billion. To upport thi growth, we old $2.4 billion non branded loan in the firt half year. A a reult, 97% of the mortgage portfolio i now branded ING DIRECT, up from 90% at the end of Credit rik performance continued to be trong lat year, with an improvement in the rik profile of the buine. Thi wa the reult of a reduction in the LVR of branded retail loan; a pull back on invetor lending; prioritiing credit quality of new buine; arrear level; and increaing houe price in a low interet rate environment. Commercial Loan The Commercial lending portfolio increaed from $3.9 to $4.8 billion (23%) upporting our aet diverification trategy. The Utilitie, Infratructure & Project Finance ( UIP ) book contributed more than $0.4 billion, while Real Etate Finance grew by almot $0.2 billion. The commercial mortgage compriing our Commercial Property Finance ( CPF ) portfolio grew lightly to $1.7 billion in line with our trategy, whilt Priority Commercial Mortgage grew by $0.2b to $1.2b. ING Bank (Autralia) Limited and it controlled entitie Annual Report

4 CEO Year in Review annuation Three year after launch, Living ha continued to be well received by cutomer and the market alike. In 2015, Living achieved $1.6 billion fund under management, repreenting an annual growth of 45% for ING DIRECT. We alo aw an increae in the number of cutomer taking out inurance with u, up 16% to 48%, following the introduction of automatic cover. In April we tarted ditributing Living via our network of advior, enabling them to offer Living a part of their retirement planning olution to their cutomer. We were delighted to receive a CANSTAR award for Living, with a five tar rating for outtanding value. Efficiency and Innovation In 2015, the Bank maintained it low cot to income ratio at 35% while operational cot over cutomer balance remained at 24 bp. In late 2015, ING DIRECT tarted to trial our new online banking platform with employee and elected cutomer. Following feedback, teting and enhancement we will continue to add new feature to our online banking to further enhance delivery and cutomer experience. Funding and Liquidity In 2015 liquidity condition for the Bank were comfortable, with ample funding available acro both retail and wholeale funding market. The Liquidity Coverage Ratio for the Autralian market tarted from January During the year the Bank overall liquidity poition wa managed to be well above the 100% minimum required by the APRA tandard. By the end of the year, the Bank LCR ratio wa approximately 116%. Reflecting the trength of the houing market and the Bank attractive product offering, growth in retail mortgage exceeded retail aving growth for the firt time in a number of year. Thi reulted in a marginal decreae in the retail funding to loan mix to 76.3% from 78.5% a year earlier. The funding poition of the bank i trong and the plan i to continue to lengthen the duration of liabilitie and reduce expoure to hort term wholeale funding market. Capital By the end of 2015, our capital adequacy ratio of 13.4% wa well above both the regulatory minimum and our internal target. A part of prudent capital management, in December 2015 the Group declared and provided for a $300 million (2014: $275 million) dividend payable to ING Bank N.V. Sutainability At ING DIRECT we are committed to helping our cutomer, the community and our taff get ahead with utainability at the heart of the way we do buine. In 2015 we remained committed to financially empowering our community. Together with our cutomer we inveted more than $250,000 in tart-up ocial enterprie via our Dreamtarter crowdfunding initiative run in partnerhip with StartSomeGood and School for Social Entrepreneur. In partnerhip with United Way Autralia we launched a financial education program for diadvantaged econdary tudent. Our taff are central to our utainability effort. Almot 40% of our people volunteered their time, kill and expertie to our community partner. Thi repreent a 30% increae on 2014 figure. ING DIRECT wa the top corporate fundraier in Cerebral Paly Alliance Steptember fundraiing campaign. More than half of our people actively participated to raie $127,000 for the caue. Staff fundraiing in 2015 wa up almot 50% on Our People At ING DIRECT we recognie that the paion, energy and dedication of our people are integral to the ucceful execution of our trategy, and in delivering an exceptional cutomer experience. We re dedicated to being a great place to work, helping our people get ahead by giving them the opportunity to fulfil their purpoe, drive their career and contribute to the ucce of ING DIRECT in the longer term. We are thankful for the award we received in 2015, in particular thoe which were voted for by our cutomer. Some of our accolade included: Mot innovative bank, and the 14 th mot innovative company in Autralia, by BRW. Bet Bank in the 2015 Mozo People Choice Banking Award for the ixth conecutive year; ING DIRECT wa awarded the highet rated non-major bank in The Advier' 2015 Third-Party Banking Report for the 4th year; Reader Diget awarded ING DIRECT a the mot truted Autralian Bank; ING DIRECT topped the Autralian Cutomer Experience Index 2015 by Forreter Reearch amongt 58 brand over 8 indutrie; Roy Morgan ranked ING DIRECT number one bank in cutomer atifaction for home loan cutomer; CANSTAR awarded ING DIRECT Living with five tar for outtanding value; ING Bank (Autralia) Limited and it controlled entitie Annual Report

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6 Director report The Director of the Group ubmit their report, together with the financial report of the Bank and it controlled entitie being: IDS Trut ; IDOL Trut Serie ; IDOL Trut Serie ; IDOL Trut Serie ; IDOL Trut Serie ; IDOL Trut Serie ; IDOL Trut Serie ; IDOL Trut Serie ; IDOL Trut Serie ; and IDOL Trut Serie for the year ended 31 December The name and detail of the Director of the Group holding office during the financial year and until the date of thi report or otherwie tated are et out below, together with detail of their qualification and pecial reponibilitie. DIRECTORS QUALIFICATIONS AND SPECIAL RESPONSIBILITIES Michael Katz, BComm (Hon), Chairman Mr Katz wa appointed Director in January 2010 and wa appointed Chairman of the Group in March Mr Katz i alo Chairman of the Remuneration & Nomination Committee and i a member of the Audit and Rik Committee. Amanda Lacaze, BA M Lacaze wa appointed Director in May M Lacaze i a member of the Audit, Rik and Remuneration & Nomination Committee. John Mater, BComm (Hon), CA, Barriter-at-Law Mr Mater wa appointed Director in January Mr Mater i Chairman of the Audit Committee and i a member of the Rik Committee. Ann Sherry AO, BA M Sherry AO wa appointed Director in Augut M Sherry AO chair the Rik Committee and i a member of the Audit and Remuneration & Nomination Committee. Vaughn Nigel Richtor, BA (Hon), Chief Executive Officer Mr Richtor wa appointed Director in February On 1 Augut 2012, Mr Richtor wa appointed Chief Executive Officer. Mark Edwin Newman, BSc (Hon) Mr Newman wa appointed Director in April Mr Newman i a member of the Audit, Rik and Remuneration & Nomination Committee. Ari Bogdaneri, BSc, BA, M.A. Mr Bogdaneri wa appointed Director in Augut Mr Bogdaneri i a member of the Audit and Rik Committee. Corneli Petru Adrianu Joeph Leenaar, LL.M, PMD Mr Leenaar wa appointed Director in March 2012 and reigned in June Mr Leenaar wa a member of the Audit, Rik and Remuneration & Nomination Committee. COMPANY SECRETARIES Rodney Palmer Marton Saville, LL.B (Hon), BA, Solicitor Mr Saville wa appointed Company Secretary of the Group in February 2015 and attended all meeting of the Board and it Committee thereafter. Mr Saville i alo the Head of Legal & Compliance for the Group. Peter Seamu Dowdall, LL.B (Hon), BCom, LLM, Solicitor Mr Dowdall wa appointed Company Secretary of the Group in October Mr Dowdall attended the meeting of the Board and it Committee in February Mr Dowdall i a enior olicitor of the Group. MEETINGS OF DIRECTORS Director (eligible to attend) Number Held Number Attended M Katz 5 5 A Lacaze 5 5 J Mater 5 5 A Sherry AO 5 4 V Richtor 5 5 M Newman 4 4 A Bogdaneri 2 2 C Leenaar 3 2 COMMITTEE MEETINGS Director (eligible to attend) Audit Committee Rik Committee R&N Committee* Held Attended Held Attended Held Attended M Katz A Lacaze J Mater N/A N/A A Sherry AO V Richtor N/A N/A N/A N/A N/A N/A M Newman A Bogdaneri N/A N/A C Leenaar * R&N Committee - Remuneration & Nomination Committee ING Bank (Autralia) Limited and it controlled entitie Annual Report

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8 Ernt & Young 680 George Street Sydney NSW 2000 Autralia GPO Box 2646 Sydney NSW 2001 Tel: Fax: ey.com/au Auditor Independence Declaration to the Director of ING Bank (Autralia) Limited A lead auditor for the audit of ING Bank (Autralia) Limited for the financial year ended 31 December 2015, I declare to the bet of my knowledge and belief, there have been: a) no contravention of the auditor independence requirement of the Corporation Act 2001 in relation to the audit; and b) no contravention of any applicable code of profeional conduct in relation to the audit. Thi declaration i in repect of ING Bank (Autralia) Limited and the entitie it controlled during the financial year. Ernt & Young Andrew Harmer Partner Sydney 30 March 2016 A member firm of Ernt & Young Global Limited Liability limited by a cheme approved under Profeional Standard Legilation 8

9 Corporate Governance Statement BOARD RESPONSIBILITIES The Board of Director of the Group i reponible for corporate governance. Compoition of the Board The Board comprie ix Non-Executive Director (two of whom are repreentative of ING Groep N.V.) and one Executive Director at the date of thi report. The Chairman i a Non-Executive Director. The Board met 5 time thi year. Board Reponibilitie The Board act on behalf of and i accountable to the hareholder. Board member have the experience and qualification to dicharge thi duty a et out in the Director Report. The Board i ubject to the prudential requirement of the Autralian Prudential Regulation Authority ( APRA ) and eek to identify and enure compliance with all regulatory and ethical expectation and obligation. In addition, the Board i reponible for identifying area of ignificant buine rik and enuring arrangement are in place to manage thoe rik. The Board alo review the corporate governance policie and procedure of the Group at leat once every year and ha external expert ae it on bet practice and development in corporate governance, rik management and other iue of interet and concern to the Board. To maintain Director independence and objectivity, a majority of Director are not Executive of the Group. External Director are appointed for an initial term of four year. The reponibility for the operation and adminitration of the Group i delegated by the Board to the Chief Executive Officer, who i reponible for the Executive team being appropriately qualified and experienced to dicharge their reponibilitie. The Board ha in place procedure to ae the performance of the Chief Executive Officer and review the Chief Executive Officer performance and remuneration annually. The Chief Executive Officer attend Board meeting and provide information, analyi and commentary to the Board. The Chief Executive Officer i entitled to one vote at Director meeting and participate at Board meeting in all matter other than where he ha a conflict, for example, where hi performance or remuneration i being reviewed. ING Groep N.V. global ucceion planning procedure identify candidate to fill the poition of Chief Executive Officer (if it become vacant) and provide other alternative candidate o there i continuity of leaderhip regardle of the circumtance. The Board eek to align management objective and activitie with the expectation and rik identified by the Board. The Board ha a number of mechanim in place to achieve thi. In addition to the etablihment of the Committee referred to below, the mechanim include the following: i. Board monitoring of performance againt a trategic plan which encompae the Group viion, miion and trategy tatement which are deigned to meet hareholder need, regulatory requirement and manage buine rik. The trategic plan i a dynamic document and the Board i actively involved in developing and approving initiative and trategie deigned to foter the growth and ucce of the Group; ii. Development and implementation of operating plan and budget by management and the Board monitoring progre againt thoe plan and budget; iii. Remuneration incentive aligned with the Medium Term Plan of the Group; and iv. Rik appetite framework deigned to achieve portfolio outcome conitent with the Group rik and return expectation. To ait in the fulfilment of it reponibilitie the Board ha intituted everal Committee that operate under charter approved by the Board. To enure that all relevant iue are addreed between meeting of the Board and it Committee, there are alo variou Committee at a buine unit level. Thee Committee are the Executive Committee, Pricing & Fee Committee, Local Credit Committee, Aet & Liability Management Committee, Non-Financial Rik Committee, Change Board, Marketing & Advertiing Compliance Committee, Quarterly Buine Review Committee and the Finance & Rik Committee. All buine unit level Committee are run by appropriate Senior Executive of the Group. Audit Committee The Audit Committee, chaired by Mr Mater, ait the Board with regard to it reponibility for overeeing that an effective internal control framework exit within the Group. Thi include internal control to deal with both the effectivene and efficiency of ignificant buine procee which involve afeguarding of aet, the maintenance of proper accounting record a well a non- ING Bank (Autralia) Limited and it controlled entitie Annual Report

10 Corporate Governance Statement BOARD RESPONSIBILITIES (CONTINUED) financial conideration uch a the benchmarking of operational key performance indicator. The Audit Committee ait the Board in the etablihment and maintenance of a framework of internal control and ethical tandard for the management of the Group. The Audit Committee alo provide the Board with additional aurance regarding the reliability of financial information for incluion in the annual report and i reponible for directing and monitoring the internal audit function and reviewing the adequacy of the cope of the external audit. Committee eek expert advice when appropriate, including when material contentiou item arie. With thee Committee in place the Board can more effectively enure the compliance, monitoring and review of all apect of the Group buine. Pillar 3 Dicloure The Common Dicloure and Regulatory Capital reconciliation document required under the Pillar 3 Dicloure, per prudential tandard APS 330 Public Dicloure are provided in the Invetor Relation ection of the Bank webite at the following addre: Furthermore, the Audit Committee monitor that management effectively deal with iue raied by both internal and external audit and that the external auditor are atifactorily dicharging their dutie. Rik Committee The Rik Committee, chaired by M Sherry AO, i reponible for overeeing the Group' aement and management of credit rik, market rik and operational rik including legal and compliance matter. The Rik Committee enure a holitic approach to rik management within the Group. It enure the Group maintain a rik management trategy and framework that i conitent with approved rik appetite and complexity of the Bank buine model. The Rik Committee formulate the Bank rik appetite for the Board conideration and alo make recommendation on key policie relating to capital, liquidity and funding enure effective and informed rik management reporting to the Board a neceary, and being available to meet with regulator (uch a Autralian Securitie and Invetment Commiion ( ASIC ) and Autralian Prudential Regulation Authority ( APRA )) on behalf of the Group, when requeted. Thi Committee generally meet on the ame day a the meeting of the Board. Remuneration & Nomination Committee The Remuneration & Nomination Committee, chaired by Mr Katz, enure that the Group remuneration arrangement upport it trategy and enable the recruitment, motivation and retention of Senior Executive. The Committee alo enure compliance with the local and ING Groep N.V. requirement of regulatory and governance bodie, atifying the expectation of hareholder and remaining conitent with the expectation of the wider employee population. All Committee perform additional function a the Board of Director may from time to time require. Thee other function are required of the Committee by applicable legilation or by any relevant regulatory authority. The ING Bank (Autralia) Limited and it controlled entitie Annual Report

11 Financial Statement Statement of Comprehenive Income for the year ended 31 December 2015 Conolidated amount in thouand of dollar Note Bank Interet income 2,081,729 2,370,329 2,080,803 2,366,000 Interet expene (1,445,294) (1,732,017) (1,442,531) (1,724,166) Net interet income 636, , , ,834 Net non-interet income 42,904 21,207 46,794 7,747 Total operating income 3 679, , , ,581 Employment expene (125,505) (118,099) (125,505) (118,099) Advertiing expene (38,637) (38,462) (38,637) (38,462) Depreciation and amortiation expene (19,543) (16,854) (19,543) (16,854) Occupancy expene (14,105) (14,540) (14,105) (14,540) Technology expene (11,382) (11,946) (11,382) (11,946) Other expene (28,054) (29,200) (27,655) (27,929) Total operating expene (237,226) (229,101) (236,827) (227,830) Loan impairment benefit / (expene) (4,627) 833 (4,627) Operating profit before tax 442, , , ,124 Income tax expene 4 (128,284) (128,777) (127,894) (126,177) Profit for the year 314, , , ,947 Other Comprehenive Income Item that may be reclaified ubequently to the income tatement Unrealied revaluation net of tax: Available for ale financial aet Gain / (loe) ariing during the year 15 (19,015) 4,849 (19,015) 4,849 (Gain) / loe tranferred to the income tatement (13,932) (813) (13,932) (813) Net gain / (loe) on available for ale financial aet (32,947) 4,036 (32,947) 4,036 Cah flow hedge Gain / (loe) ariing during the year 28,671 (23,914) 28,671 (23,914) (Gain) / loe tranferred to the income tatement (29,674) (17,484) (29,674) (17,484) Net gain / (loe) on cah flow hedge 9 (1,003) (41,398) (1,003) (41,398) Total amount recognied directly in equity (33,950) (37,362) (33,950) (37,362) Total Comprehenive Income 280, , , ,585 ING Bank (Autralia) Limited and it controlled entitie Annual Report

12 Financial Statement Balance Sheet a at 31 December 2015 Conolidated Bank amount in thouand of dollar Note ASSETS Cah and cah equivalent 6 708, , , ,421 Due from other financial intitution 7 351, , , ,151 Available for ale financial aet 8 4,853,425 7,346,518 4,853,425 7,346,518 Derivative aet 9 52,629 56,665 15,450 17,485 Receivable and other aet 155, , , ,344 Loan and advance 10 43,594,208 41,762,000 43,594,208 41,762,000 Deferred tax aet 4 63,179 64,534 63,179 64,534 Property, plant and equipment 90,600 46,758 90,600 46,758 Intangible aet 1, , Total aet 49,870,852 50,672,433 49,715,819 50,381,001 LIABILITIES Depoit and other borrowing 11 42,013,285 41,772,205 42,215,698 41,888,954 Derivative liabilitie 9 357, , , ,882 Creditor and other liabilitie 314, , , ,817 Current tax liabilitie - 45,905-43,301 Proviion , , , ,979 Deferred tax liabilitie 4 56,023 36,760 50,548 36,760 Debt iue 13 3,310,961 4,154, ,404 Amount due to controlled entitie - - 2,964,897 3,376,638 Total liabilitie 46,370,966 47,155,032 46,213,552 46,867,735 Net aet 3,499,886 3,517,401 3,502,267 3,513,266 EQUITY Contributed equity 14 1,334,000 1,334,000 1,334,000 1,334,000 Reerve 15 66,737 98,194 66,737 98,194 Retained profit 2,099,149 2,085,207 2,101,530 2,081,072 Total equity 3,499,886 3,517,401 3,502,267 3,513,266 ING Bank (Autralia) Limited and it controlled entitie Annual Report

13 Financial Statement Statement of Change in Equity for the year ended 31 December 2015 Conolidated 31 December 2015 amount in thouand of dollar Iued capital General reerve Cah flow hedge reerve Available for ale reerve Retained earning Total equity Note A at 1 January ,334, ,506 (65,362) 24,050 2,085,207 3,517,401 Profit for the year , ,662 Other comprehenive income - - (1,003) (32,947) - (33,950) Total comprehenive income - - (1,003) (32,947) 314, ,712 Dividend provided for or paid (300,000) (300,000) General reerve for credit loe (720) - Share-baed payment plan 19-1, ,773 A at 31 December ,334, ,999 (66,365) (8,897) 2,099,149 3,499, December 2014 amount in thouand of dollar Iued capital General reerve Cah flow hedge reerve Available for ale reerve Retained earning Total equity Note A at 1 January ,334, ,163 (23,964) 20,014 2,065,383 3,531,596 Profit for the year , ,014 Other comprehenive income - - (41,398) 4,036 - (37,362) Total comprehenive income - - (41,398) 4, , ,652 Dividend provided for or paid (275,000) (275,000) General reerve for credit loe - 2, (2,190) - Share-baed payment plan 19-1, ,153 A at 31 December ,334, ,506 (65,362) 24,050 2,085,207 3,517,401 ING Bank (Autralia) Limited and it controlled entitie Annual Report

14 Financial Statement Statement of Change in Equity for the year ended 31 December 2015 Bank 31 December 2015 amount in thouand of dollar Iued capital General reerve Cah flow hedge reerve Available for ale reerve Retained earning Total equity Note A at 1 January ,334, ,506 (65,362) 24,050 2,081,072 3,513,266 Profit for the year , ,178 Other comprehenive income - - (1,003) (32,947) - (33,950) Total comprehenive income - - (1,003) (32,947) 321, ,228 Dividend provided for or paid (300,000) (300,000) General reerve for credit loe (720) - Share-baed payment plan 19-1, ,773 A at 31 December ,334, ,999 (66,365) (8,897) 2,101,530 3,502, December 2014 amount in thouand of dollar Iued capital General reerve Cah flow hedge reerve Available for ale reerve Retained earning Total equity Note A at 1 January ,334, ,163 (23,964) 20,014 2,067,315 3,533,528 Profit for the year , ,947 Other comprehenive income - - (41,398) 4,036 - (37,362) Total comprehenive income - - (41,398) 4, , ,585 Dividend provided for or paid (275,000) (275,000) General reerve for credit loe - 2, (2,190) - Share-baed payment plan 19-1, ,153 A at 31 December ,334, ,506 (65,362) 24,050 2,081,072 3,513,266 ING Bank (Autralia) Limited and it controlled entitie Annual Report

15 Financial Statement Cah Flow Statement for the year ended 31 December 2015 Conolidated amount in thouand of dollar Note Bank Cah flow from operating activitie Operating profit before tax 442, , , ,124 Adjutment for: Depreciation and amortiation expene 19,543 16,854 19,543 16,854 Loan lo proviion (833) 4,627 (833) 4,627 Other (38,952) (75,266) (41,432) (72,665) Taxe paid (145,451) (99,178) (145,451) (99,178) Change in: Loan and advance (1,831,375) (778,781) (1,831,375) (778,781) Derivative (98,327) 276,549 (101,017) 283,280 Receivable and other aet 63,119 (17,261) 42,360 (27,488) Creditor and other liabilitie (79,052) 3,704 (76,562) (3,267) Depoit 687, , ,963 1,089,694 Net cah flow from operating activitie (981,083) 751,823 (912,732) 830,200 Cah flow from inveting activitie Change in: Available for ale financial aet 2,493,093 80,431 2,493,093 80,431 Property, plant and equipment (64,185) (26,110) (64,185) (26,110) Net cah flow from inveting activitie 2,428,908 54,321 2,428,908 54,321 Cah flow from financing activitie Change in: Depoit payable to other financial intitution 2 (446,219) 684,190 (446,219) 684,190 Debt iue (843,435) (1,375,656) (386,404) (1,296,282) Amount due to controlled entitie - - (411,741) (128,962) Dividend paid (275,000) - (275,000) - Net cah flow from financing activitie (1,564,654) (691,466) (1,519,364) (741,054) Net cah flow (116,829) 114,678 (3,188) 143,467 Cah and cah equivalent at beginning of year 1 1,176,625 1,061, , ,105 Cah and cah equivalent at end of year 1 6 & 7 1,059,796 1,176, , ,572 1 For the purpoe of the Cah Flow Statement, cah and cah equivalent include cah and cah equivalent at note 6 and due from other financial intitution at note 7. 2 For the purpoe of the Cah Flow Statement, depoit payable to other financial intitution exclude depoit from Self M anaged Fund. Thi ha been dicloed a depoit under net cah flow from operating activitie, reflecting the underlying nature of thee cahflow. ING Bank (Autralia) Limited and it controlled entitie Annual Report

16 Note to the Financial Statement 1. BASIS OF PREPARATION 1.1 Corporate information ING Bank (Autralia) Limited and it controlled entitie ( the Group ) i a for-profit company incorporated and domiciled in Autralia. The regitered office and principal place of buine of the Group i Level 14, 140 Suex Street, Sydney NSW The ultimate parent entity of the Group i ING Groep N.V. The financial report for the year ended 31 December 2015 i compried of the Bank and it controlled entitie, IDS Trut , IDOL Trut Serie , IDOL Trut Serie , IDOL Trut Serie , IDOL Trut Serie , IDOL Trut Serie , IDOL Trut Serie , IDOL Trut Serie , IDOL Trut Serie and IDOL Trut Serie (collectively referred to a the Group ). The financial report wa authoried for iue in accordance with a reolution of the Director on 30th March The nature of the operation and principal activitie of the Group are decribed in the Director Report. 1.2 Bai of accounting Thi general purpoe financial report ha been prepared in accordance with Autralian Accounting Standard ( AAS ) and Interpretation iued by the Autralian Accounting Standard Board ( AASB ) and the Corporation Act The conolidated financial tatement and note thereto alo comply with International Financial Reporting Standard ( IFRS ) a iued by the International Accounting Standard Board ( IASB ). The financial report i preented in Autralian Dollar which i alo the functional currency. All value are rounded to the nearet $1,000, under the option available to the Group under ASIC Cla Order No. 98/100, unle otherwie tated. The financial report i prepared on a hitorical cot bai, except for available for ale financial aet and financial intrument which are meaured at fair value. 2. SIGNIFICANT ESTIMATES AND JUDGEMENTS In applying the Group accounting policie, management continually evaluate judgement, etimate and aumption baed on experience and other factor, including expectation of future event that may have an impact on the Group. All judgement, etimate and aumption made are believed to be reaonable baed on the mot current et of circumtance available to management even though actual reult may differ. The etimate and underlying aumption are reviewed on an ongoing bai. Information about ignificant area of etimation uncertainty and critical judgement in applying accounting policie that have a ignificant effect on the amount recognied in the financial tatement are decribed below: Area Interet income and expene Impairment of loan and advance Significant etimate and judgement Interet income and expene are recognied uing the effective interet rate method which i the rate that exactly dicount etimated future cah payment or receipt through the expected life of the financial intrument to the net carrying amount of the financial aet or liability. Fee aociated with the origination of loan and advance or financial liabilitie are capitalied and included a part of the amortied cot of the aet or liability and are expened over the expected life of the loan under the effective interet rate method. Specific proviion are raied where there i objective evidence of impairment (where the Group doe not expect to receive all of the cah flow contractually due). The proviion are etablihed baed primarily on etimate of the realiable (fair) value of collateral taken and are meaured a the difference between a financial aet carrying amount and the preent value of the expected future cah flow dicounted at the financial aet original effective interet rate. ING Bank (Autralia) Limited and it controlled entitie Annual Report

17 Note to the Financial Statement 2. SIGNIFICANT ESTIMATES AND JUDGEMENTS (CONTINUED) Impairment of loan and advance (continued) Impairment of available for ale financial aet Impairment of intangible Ueful life of aet Financial intrument fair value Taxation Employee benefit Share baed payment Conolidation deciion Collective Proviion are proviion in repect of loan and advance that are not individually aeed for impairment and are therefore aeed collectively for impairment. The collective proviion i maintained to reduce the carrying amount of portfolio of imilar loan and receivable to their etimated recoverable amount at the Balance Sheet date. Coniderable judgement i exercied in identifying and determining the extent of the loan lo proviion (impairment) and i baed on management evaluation of the rik in the portfolio, current economic condition, lo experience in recent year and credit, indutry and geographical concentration trend a well a the financial condition of the counterparty and expected cah flow. Available for ale aet are conidered to be impaired if there ha been a ignificant or prolonged decline in the fair value below it cot. The Group ue it judgement to elect a variety of method and make aumption that are mainly baed on market condition exiting at the end of each reporting period. The intangible aet included on the Group Balance Sheet ha been deemed to have a finite ueful life of 5 year. An impairment aement i conducted by the Group at leat annually a to whether indicator of impairment uch a technical obolecence exit. The etimation of ueful live, reidual value and amortiation method require ignificant management judgement and are reviewed annually. Any change in depreciation or amortiation rate will change from date of re-aement to the end of the revied ueful life of the aet. The bet evidence of fair value i quoted price in an active market. If the market for a financial intrument i not active, the Group etablihe fair value by uing a valuation technique. The objective of uing a valuation technique i to etablih what the tranaction price would have been on the meaurement date in an arm length exchange motivated by normal buine conideration. Valuation technique are ubjective in nature and involve variou aumption regarding pricing factor. Proviion for taxation require ignificant judgement with repect to outcome that are uncertain. The Group ha etimated it tax proviion baed on expected outcome. Deferred tax aet are recognied for deductible temporary difference a management conider that it i probable that future taxable profit will be available to utilie thoe temporary difference. Proviion for long ervice leave involve ignificant judgement about the likely outcome of variou event and etimated future cah flow. Payment which are expected to be incurred later than one year are dicounted at a rate which reflect both current interet rate and the rik pecific to that proviion. In determining the preent value of the long ervice leave liability, employee termination rate, future alary level and the market yield a at the reporting date on corporate bond rate which have term to maturity approximating the term of the related liability are ued. The fair value of hare option and performance unit i determined uing a Monte Carlo imulation. Thi take into account the rik free interet rate, expected life of the option granted, exercie price, current hare price, expected volatility of the certificate of ING Groep N.V. and expected dividend yield. The Group exercie judgement to ae it control and whether a pecial purpoe entity hould be conolidated baed on the Bank power to direct the relevant activitie of the entity, it expoure to variable return and the ability to ue it power to affect thoe return. ING Bank (Autralia) Limited and it controlled entitie Annual Report

18 Note to the Financial Statement 3. OPERATING INCOME Conolidated Bank amount in thouand of dollar Interet income Cah and cah equivalent 14,624 19,344 11,189 15,015 Due from other financial intitution 7,623 7,376 7,623 7,376 Available for ale financial aet 189, , , ,597 Loan and advance 1,841,640 2,030,912 1,841,640 2,030,912 Gain on non-trading derivative 28,333 65,100 30,842 65,100 Total interet income 2,081,729 2,370,329 2,080,803 2,366,000 Interet expene Depoit 1,210,403 1,387,796 1,215,639 1,391,634 Debt iue 113, ,908 4,438 51,721 Loe on non-trading derivative 121, , , ,749 Amount due to controlled entitie , ,306 Other interet expene - 5,756-5,756 Total interet expene 1,445,294 1,732,017 1,442,531 1,724,166 Net interet income 636, , , ,834 Non-interet income Account fee 24,977 11,544 24,977 8,562 Dicharge fee and penaltie 6,050 3,268 6,050 3,268 Gain from ale of available for ale financial aet 19,903 1,162 19,903 1,162 Lo from repurchae of debt ecuritie (666) (2,568) (666) (2,568) Gain from ale of loan 47,475 24,929 47,475 24,929 Fee and commiion (31,371) (6,825) (29,671) (6,825) Net ineffectivene on cah flow hedge (168) 234 (168) 234 Net ineffectivene on fair value hedge (107) 4,413 (107) 4,413 Other (23,189) (14,950) (20,999) (25,428) Net non-interet income 42,904 21,207 46,794 7,747 Total operating income 679, , , ,581 Income recognition Accounting policy Interet income on loan and advance i brought to account uing the effective interet rate method. Fee earned from the origination of loan are recognied in interet income uing the effective interet rate method. Interet expene on financial liabilitie meaured at amortied cot i recognied in the Income Statement uing the effective interet rate method. Interet expene include iue cot that are initially recognied a part of the carrying value of the liability and amortied over the expected life. Thee include fee and commiion payable and other expene that are direct and incremental cot related to the iue of a financial liability. Fee and commiion that relate to the execution of a ignificant act are recognied in non-interet income when the ignificant act ha been completed. Fee charged for providing ongoing ervice are recognied in non-interet income over the period the ervice i provided. ING Bank (Autralia) Limited and it controlled entitie Annual Report

19 Note to the Financial Statement 4. INCOME TAX EXPENSE Conolidated Bank amount in thouand of dollar Income Statement Current income tax 93, ,221 98, ,621 Deferred income tax 35,168 6,556 29,692 6,556 Income tax expene reported in Income Statement 128, , , ,177 Statement of Comprehenive Income Deferred income tax Revaluation of cah flow hedge (430) (17,743) (430) (17,743) Revaluation of available for ale financial aet (14,120) 1,730 (14,120) 1,730 Income tax expene recognied in other comprehenive income (14,550) (16,013) (14,550) (16,013) Reconciliation of prima facie income tax expene on accounting profit before income tax expene: Operating profit before tax 442, , , ,124 Prima facie income tax on operating profit at 30% (2014: 30%) 132, , , ,137 Income Tax over/(under) provided in prior year (974) 1,576 (974) 1,576 Effect of amount which are not (aeable)/deductible (3,626) (536) (5,854) (536) Income tax expene reported in Income Statement 128, , , ,177 Income tax Accounting policy Income tax expene comprie current and deferred tax. Income tax i recognied in profit or lo in the Income Statement except to the extent that it relate to item recognied directly in equity, or other comprehenive income. Current income tax i the tax payable or receivable on the taxable income or lo for the year baed on tax rate (and tax law) that have been enacted or ubtantively enacted at the reporting date and any adjutment to tax payable or receivable in repect of previou year. Deferred tax aet and liabilitie are recognied baed on temporary difference between the tax bae and the accounting carrying amount of an aet or liability in the Balance Sheet. They are meaured at the tax rate that are expected to apply in the year when the aet i realied or the liability i ettled, baed on tax rate (and tax law) that have been enacted or ubtantively enacted at the balance heet date. Deferred tax aet are reduced to the extent that it i no longer probable that the related tax benefit will be realied baed on future taxable amount. Effective tax rate for 2015 i 28.96% (2014: 30.24%). Tax conolidation ING Bank (Autralia) Limited and other wholly owned ubidiarie of ING Groep N.V. in Autralia formed a tax conolidated group from 1 January 2004 and are taxed a a ingle entity from that date. The tax conolidated group doe not include the Trut. Member of the tax conolidated group have entered into a tax haring deed in order to allocate income tax payable to group member. Thi allocation i calculated on a tand-alone taxpayer approach. The amount receivable or payable under the tax haring deed are due upon receipt of the funding advice from the Head Entity, which i iued a oon a practicable after the end of each financial year. The Head Entity may alo require payment of interim funding amount to ait with it obligation to pay tax intalment. The Head Entity of the tax conolidated group i ING Autralia Holding Limited and other eligible member include ING REDA Holding Pty Limited, ING Real Etate Invetment Management Autralia Pty Limited and Jaring Pty Limited. ING Bank (Autralia) Limited and it controlled entitie Annual Report

20 Note to the Financial Statement 4. INCOME TAX EXPENSE (CONTINUED) amount in thouand of dollar Conolidated Conolidated Bank Bank Balance Sheet Income Statement Balance Sheet Income Statement Deferred income tax at 31 December relate to the following: Deferred tax liabilitie Deferred lending expene 34,256 27,717 6,538 3,938 34,256 27,717 6,538 3,938 Revaluation of financial intrument Revaluation of available for ale financial aet (455) (455) - 3,114 - (553) - 3,114 - (553) Revaluation of fair value hedge (1,071) (1,071) Accelerated depreciation for tax purpoe 14,884 4,375 10, ,884 4,375 10, Revaluation of derivative 4, Other 2,722 1,554 5,329 (19) 1,408 1,554 (147) (19) Total deferred tax liabilitie 56,023 36,760 50,548 36,760 Deferred tax aet Depreciation and amortiation expene 2,848 3, (462) 2,848 3, (462) Proviion for impairment 8,266 12,142 3, ,266 12,142 3, Deferred lending income (37) 1, (37) 1,646 Revaluation of available for ale financial aet 11, , Revaluation of cah flow hedge 28,426 27,946 (50) 71 28,426 27,946 (50) 71 Accrued expene 4,932 11,749 6,817 2,985 4,932 11,749 6,817 2,985 Proviion 5,497 5,094 (403) (1,487) 5,497 5,094 (403) (1,487) Deferred borrowing cot 1,066 1, ,066 1, Other 1,043 2,372 1, ,043 2,372 1, Total deferred tax aet before et- off 63,179 64,534 63,179 64,534 Net deferred tax aet 7,156 27,774 12,631 27,774 Deferred income tax charge 35,168 6,556 29,692 6,556 ING Bank (Autralia) Limited and it controlled entitie Annual Report

21 Note to the Financial Statement 5. SEGMENT REPORTING The Group ha four operating egment being Mortgage, Saving, Commercial Loan and annuation. The Group determine and preent operating egment baed on the information that i provided internally to the Executive Committee, being the Bank chief operating deciion maker. The information allow the aement of performance and determination of the allocation of reource. In the current period, management ha revied it operating egment to better align with the information provided to the Bank Executive Committee. Comparative information ha therefore been retated. Conolidated Year ended 31 December 2015 amount in thouand of dollar Mortgage Saving Commercial Loan annuation Total Operating income 375, ,465 80,743 (3,476) 679,339 Loan lo proviioning (3,401) - 4, Allocated expene (92,348) (120,014) (11,781) (13,083) (237,226) Net egment earning 279, ,451 73,196 (16,559) 442,946 Income tax expene (128,284) Profit for the year 279, ,451 73,196 (16,559) 314,662 Reportable egment aet and liabilitie Loan and Advance 38,645,272-4,948,936-43,594,208 Depoit and other borrowing 1-33,286, ,469 34,198,794 Year ended 31 December 2014 amount in thouand of dollar Mortgage Saving Commercial Loan annuation Total Operating income 338, ,097 72,095 (1,441) 659,519 Loan lo proviioning (24) - (4,603) - (4,627) Allocated expene (93,683) (112,282) (9,644) (13,492) (229,101) Net egment earning 245, ,815 57,848 (14,933) 425,791 Income tax expene (128,777) Profit for the year 245, ,815 57,848 (14,933) 297,014 Reportable egment aet and liabilitie Loan and Advance 37,795,169-3,966,831-41,762,000 Depoit and other borrowing 1-32,850, ,652 33,525,371 1 Term depoit exclude pa through funding from ING Bank N.V. (Sydney Branch) of $7.8b (2014: $8.2b) in addition to pa through funding of $0.1b of depoit at call. ING Bank (Autralia) Limited and it controlled entitie Annual Report

22 Note to the Financial Statement 6. CASH AND CASH EQUIVALENTS Conolidated Bank amount in thouand of dollar Cah and liquid aet 358, , , ,401 Cah equivalent held by other financial intitution 349, , , ,020 Total cah and cah equivalent 708, , , ,421 Cah and cah equivalent Accounting policy Comprie cah on hand, in bank and at-call loan excluding cah collateral. Thee are readily convertible to known amount of cah which are ubject to inignificant rik of change in value and are initially meaured at fair value and ubequently meaured at amortied cot which i an approximation of fair value a they are hort term in nature. 7. DUE FROM OTHER FINANCIAL INSTITUTIONS Conolidated Bank amount in thouand of dollar Cah collateral 351, , , ,401 Depoit placed with other financial intitution ,750 Total due from other financial intitution 351, , , ,151 Due from other financial intitution Accounting policy Include cah collateral pledged to counterpartie on derivative intrument and are initially meaured at fair value and ubequently meaured at amortied cot which i an approximation of fair value a they are hort term in nature. 8. AVAILABLE FOR SALE FINANCIAL ASSETS Conolidated Bank amount in thouand of dollar Floating rate note - 891, ,974 Treaury note - 235, ,574 Dicount ecuritie 99, ,482 99, ,482 Corporate bond 655, ,623 - Covered bond 433, , , ,857 Government bond 3,661,282 5,050,826 3,661,282 5,050,826 Mortgage-backed ecuritie 3,399 28,805 3,399 28,805 Total available for ale financial aet 4,853,425 7,346,518 4,853,425 7,346,518 Maturity analyi of available for ale financial aet Not longer than 3 month 168, , , ,104 Longer than 3 month and not longer than 1 year 1,284,154 1,910,878 1,284,154 1,910,878 Longer than 1 year and not longer than 5 year 1,887,034 3,190,251 1,887,034 3,190,251 Longer than 5 year 1,513,396 1,640,285 1,513,396 1,640,285 Total available for ale financial aet 4,853,425 7,346,518 4,853,425 7,346,518 ING Bank (Autralia) Limited and it controlled entitie Annual Report

23 Note to the Financial Statement 8. AVAILABLE FOR SALE FINANCIAL ASSETS (CONTINUED) Available for ale financial aet Accounting policy Available for ale financial aet are non-derivative financial aet that are not deignated a fair value through the profit and lo, held to maturity or loan and advance. Available for ale aet primarily comprie debt ecuritie and are initially recognied at fair value plu tranaction cot and are ubequently meaured at fair value with gain and loe recognied in the available for ale reerve within equity until dipoal or impairment where the gain or loe are tranferred to the Income Statement. Financial aet Accounting policy All financial aet are recognied initially at fair value plu, in the cae of financial aet not recorded at fair value through profit or lo, tranaction cot that are attributable to the acquiition of the financial aet. Tranaction cot of financial aet carried at fair value through profit or lo are expened in the Income Statement. All purchae and ale of financial aet claified a available for ale that require delivery within the time frame etablihed by the regulation or market convention are recognied at trade date. 9. DERIVATIVES Conolidated amount in thouand of dollar Notional Fair value aet Fair value liability Notional Fair value aet Fair value liability Derivative deignated a fair value hedge Interet rate wap 2,842,000 1,366 (246,820) 4,441,000 1,448 (345,983) Total fair value hedge 2,842,000 1,366 (246,820) 4,441,000 1,448 (345,983) Derivative deignated a cah flow hedge Interet rate wap 16,500,900 11,555 (106,363) 14,285,000 14,486 (107,639) Total cah flow hedge 16,500,900 11,555 (106,363) 14,285,000 14,486 (107,639) Other derivative Cro currency wap 112,233 33, ,792 34,053 - Bai wap 1,252, (265) 2,349, (256) Interet rate wap 1,457,628 5,763 (4,239) 1,104,541 6,422 (6,172) Total other derivative 2,822,238 39,708 (4,504) 3,581,117 40,731 (6,428) Total recognied derivative aet/(liabilitie) 22,165,138 52,629 (357,687) 22,307,117 56,665 (460,050) ING Bank (Autralia) Limited and it controlled entitie Annual Report