Slide 1: Ts ee
a) — y Ts ee LN : : ci) a Michael Tilley, CEO Paul Rogan, CFO 28 August 2006
Slide 2: Headlines
Headlines CGF invests to deliver double digit EPS growth 49% increase in NPAT' Strong performance across the Group: Quality products & services delivered 16% in Assets & Loans under Management Scaleable business model delivered 30% in income, 12% in casts | and 58% in EBIT Low cost model focused on
Slide 3: Financial Headlines
Financial Headlines Historic cost Portfolio volume $36.5bn T 15.7% Net Income $446m 30.4% Expenses’ $236m A 12.4% EBIT $209m S 58.3% NPAT: $125m A 48.8% ‘ Historic cast before significant items c hallen ger Ce
Slide 4: Our model
Our model Focused on delivering returns | INVESTMENT OBJECTIVES: RONA > 18% DOUBLE DIGIT EPS GROWTH | INVESTMENT OUTCOMES: RONA = 16% DOUBLE DIGIT EPS GROWTH’ | Historic cost
Slide 5: Performance Highlights
Performance Highlights Focused in core markets exhibiting strong environmental growth challenger aed 5 Market stats sourced fram RBA, Plan for Life and Challenger estimates tee
Slide 6: i August 2006
a ae y i 28 August 2006 — — ae a a nic Le au ee
Slide 7: Financial Highlights
Financial Highlights Statutory Eri“ ti*™*s—s—sSOisCOWwSCSOr=SCOUsésiézéizsz NPAT undenying’ $153m WS 27.8% NPAT $134m A 12.3% EPS basic ops — underlying 28.4 A 25.1% EPS dituted ops - underlying 27.3 A 20.2% DPS 7.5¢ 4 50.0% | Underlying is before significant items c hallen ger Ce
Slide 8: Financial Summary
Financial Summary Underlying statutory profits up 28% (89) 3 13 : A i f r 7 r t a t a NPAT 2005 Net Invest Fee income Other Expenses Interest Tax Under. Hilton! CIF Hedge NPAT 2006 income Income NPAT 2006 Revals £2 challenger re 8 Posi tax
Slide 9: Financial Highlights
Financial Highlights Historic cost Portfolio volume $36.5bn 15.7% (Total agseis & toans under managementiadmin} Net Income $446m A 30.4% Expenses: $236m 12.4% EBIT $209m * 58.3% NPAT underlying! $t 25m * 48.8% NPAT $116m 4 38.1% EPS basic cps 21.6 “” 35.8% EPS diluted cps 20.9 ” 29.7% 9 | Underlying
Slide 10: Financial summary
Financial summary Historic cost underlying result up 49% 104 (27) 125 (9) os NPAT 2605 Revenue Expenses Interest Tax 10 Underlying Signif. erms NPAT 2006 NPAT 2006 (Hilton) aed challenger re
Slide 11: Key performance trends
Key performance trends Asset 500 + 100% Gost / Income / 04-06 CAGH income Expenses 450 4 90% Ratio% SMN 446 BO% FO% woo | 8 at gl cov — 58% . 250 + 4 er 50% 40% 30% 20% 10% | o% 2004 2005 2006 Asseis under Mgt mame income mime Expenses“ “Cost/income Ratio EPS basic eps 9.1* 15.9 21.6 DPS eps Nil 5.0
Slide 12: Segment contribution
Segment contribution EBIT up 58% 12 2 { 209 182 E a 2005 EBIT Mortgage Funds Asset Financial Corporate 2006 EBIT %, Management Management Management Planning challenger 2 ae
Slide 13: Mortgage Management
Mortgage Management Delivering profitable growth in competitive market Ee Portfolio volume $18.3bn 4 14.0% Net Income $134m 241% Expenses $56m 19.1% EBIT $78m 27.9% RONA 21.7% 15.4% Net Assets 1 July 2008 $360m Fv08 Net Assets 320 June 2006 $412m vor £2 challenger re
Slide 14: Mortgage Management
Mortgage Management 14 income EBIT up 28% 24 2 (7) Le = [| E A e : r r r ¢ 7 1 2008 EBIT Residential net income Commercial net Employee expense Other expenses 2006 EBIT £2 challenger re
Slide 15: Mortgage Management
Mortgage Management Key performance trends Asset 160 4 04-06 CAGR 7 100% Costs Income / Income Expenses 90% Ratio % $MN 140 80% 120 + 70% 100 80% 50% AD 30% 20%, 18%, O% 2004 2005 2006 [1 Residentiat Mortgage: “Income — —te= Expenses “ ~ Cost/income Ratio RONA n/a 18.8% 21.7% £2 challenger re 15
Slide 16: Mortgage Management
16 Mortgage Management Delivering profitable growth in competitive market Net loan growth in Residential market driven by: new product initiatives systems integration - B2B connectivity to originators superior service delivery Outperforming the market while growing margin — focus remains on profitab
Slide 17: Funds Management
Funds Management Delivering performance, FUM growth and profits .....stisiz“éijiéiéséitété#é(wWw Portfolio volume $12.9bn A 21.6% Net Income $92m > 61.4% Expenses $68m 15% EBIT $24m *» large RONA 18.6% “> large Net Assets 1 July 2008 $131m FYO6 Net Assets 30 June 2006 $1 35m Fvo7 £2 challenger re
Slide 18: Funds Management
$m Funds Management EBIT strongly into profit 18 Employee expense Other expenses Other income 2006 EBIT challenger ae ae
Slide 19: Funds Management
Funds Management Key performance trends Assets 120 + covet acd 17% 128% Gost / Income / 110% mame aan 04-06 CAGR Income Expenses Ratio % $MN 100 + 100% 80 4 80% 60 + 80% 40 +4 40% 204 20% 0 : O% 2004 2005 2006 Funds under Mgt «tie Income —*— Expenses “s ~~ Cost/Income Ratio RONA na nia 18.6% AM . ch
Slide 20: Funds Management
20 Funds Management Delivering performance, FUM growth and profits ‘Alpha Generation Across Seoioes/ Stategios Solid alpha generation: across asset sectors across strategies Prop Gee ‘enchmatk Alpha » Peer Group Median Increasingly diversified, high quality FUM peanicnen Asse! Colsulant Co IS gore G
Slide 21: Asset Management
Asset Management Steady growth as new business lines build Portfolio volume $3.70n 13.2% (Total assets under management) Net Income ~— Spread $i26m 3.1% — Fees $5im S large — Total $1 7m ws 29.2% Expenses $54m * 45.9% EBIT $123m 23.0% RONA 21.9% * 58% Net Assets closing 30 June $561 m FYO6 » Net Ass
Slide 22: Asset Management
$m Asset Management EBIT up 23% 36 (15) | | (2) 123 — 100 2 ee ci r r r r ¢ cot 2005 EBIT Yield Reatised gains Net fee income Employee expense Other expense 2006 EBIT challenger 2B ae ae
Slide 23: Asset Management
Asset Management Key performance trends Asset 250 4 100% Cost/ incorne / Income Expenses. 90% Ratio % $MIN 04-06 CAGR 200 + 80% 177 70% 150 4 60% 50% 100 4 40% 8 1% 1 30% 80% OTK 30% 50 4 aa 54 20% ei? wee 10% a roe , a ee , o™ 2004 2005 2006 Assets under Mgt stim income —— Expenses » = Cost/income
Slide 24: Asset Management
Asset Management Spread business continues to perform Spread! » Investment strategy: 3.0% Long term predictable income streams 2.0% Target asset allocation 1.0% - Property 30% 0.0% | ; » infrastructure 30% 2004 2005 2006 > Fixedincome 30% » Other 10% Active investor with total return Realsed gains b
Slide 25: Asset Management
Asset Management Spread business continues to perform Asset Management Statutory Net Assets 7 Capital 4.000 m S&P rating ‘A” 800 m Provides significant benefits “rn Disciplines and systems to . | maintain in place on 2o04 2008 2008 . Fu n di ng "Policy fability af June 2004 valued af market valua co
Slide 26: Asset Management
Asset Management Fee income — the emerging new business Fee income » Investment in revenue producers Senior hires across investment classes 30.9 ‘at ES - Future growth aan High growth environment Listed and unlisted property trusts Asset Management — environment growth Extension of infrastructure tr
Slide 27: Financial Planning
a7 Financial Planning Fundamentals improving Net Income $43m * 10.3% Expenses $36m ® 5.9% EBIT $7m 4 40.0% RONA 4.9% 4 22.5% Net assets : July 200s $1 44m Fv06 Net assets closing 30 June 2008 $1 46m evo? challenger ae ae
Slide 28: Financial Planning
$m Financial Planning EBIT up 40.0% a) (4) 5 F r ¢ r r : cot 1 2005 ERIT Underlying growth — Synergy platform Synergy cost Investment in brand — Other income 2006 EBIT in fee income repricing savings and systems iC, challenger aed 26 tee
Slide 29: Financial Planning
Financial Planning Key performance trends Asset 70 4 102% te 108% Cost / income / a ee Income Expenses OS 90% Ratio % $MN 604 18a « ‘ 2» B3% , ° 80% 04-06 CAGR 505 70% 43 - % “4 60% 36 50% 30 + 40% 20 + 30% 20% 104 10% 0 We om 2004 2005 2006 Funds under Admin«=tIncome we Expenses a ~ Cost/income Rat
Slide 30: Financial Summary
$m Financial Summary Corporate costs (70) (71) 30 NPBT 2005 Employee & Other Interest Expenses CIF Equity Bridge Interest Hitton Relocation Expense NPBT 2006 challenger ae ae
Slide 31: Balance Sheet
Balance Sheet Post deconsolidation of CIF Assets Cash 389 491 20.8% invesimenis 3.417 3,041 M124% Goodwill 554 562 1.4% Other assets 564 364 56.2% Securitised assets “ ' Liabilities Debt 636 601 5.8% Policy liabilities 2,138 2.274 5.9% Other liabilities 877 426 Marge Securitised liabilities 19.680 1
Slide 32: Cashflow
Cashflow Post deconsolidation of CIF ou EY 08! Opening cash balance 491 626 \ 21.7% Operating cashflows? 229 162 4 42.0% investing activities 252 4,443 \ 77 4% Financing activities {593} (1,410) vv 58.0% Cash acquired on acquisition 10 - - Available cash balance® 62 73 V 21.9% ! Restaied under AIFRS
Slide 33: Debt & Gearing
Debt & Gearing ou FY 06 a ce Ls Debt Financial debt! Corporate facilities 120 70 AT1% Other - 2 + large Operating leverage? within MM ~ securitisation trusts 19,680 16,945 16% MM — NIM facility 230 180 N27 Yo AM — property trusts 286 349 V18 % AN - CIF 1,135 - Gearing? Net Debt* / Book Equity 4.7% N
Slide 34: Dividend
Dividend Board approved policy Pay out a minimum of 30% of statutory profits after tax Final dividend declared 5 cents per share fully franked Full year dividend 7.5 cents payout ratio 33% 50% increase on FY05 Dividend reinvestment plan suspended 34 7S cents 25 Fyoa alae interim FYOS FYO6 (2228 Fina
Slide 35: Outlook 2006/2007
Outlook 2006/2007 Continuing to build on core themes across all business lines Mortgage Management: Continued focus on profitable growth through leading product, technology, and service offering; while maintaining cost to book size Funds Management: Continued focus on delivering sustainable alpha ge
Slide 36: Summary
36 2 Historic cost - basic after significant items FYO6 36% increase to 21.6 ops Summary CGF invests to deliver double digit EPS growth 49% increase in NPAT' Strong performance across the Group: Quality products & services delivered 16% in Assets & Loans under Management Scaleable business model del
Slide 37: Key dates
37 27 September Dividend record date 20 October Dividend payment cate 25 October Educational briefing for analysts 23 November Annual General Meeting 26 February Half-year results to 31 December 2006 challenger ae ae
Slide 38: Zo cos escent: _
a_i nn Zo cos escent: _ a : - | cin NTA NET 2 sini challenger 38
Slide 39: Consolidated Profit and Loss Statutory
39 Consolidated Profit and Loss Statutory Appendix -1 AIERS AGAAP AIFRS $m FY 06. FY 05 FY 04 2106. 4H 06 2H 05 4HO5 income Net rental income 95 AG 4g 33 30 lavestimeat income 99 50. ag 68 7h Net realised and unrealised gains/(losses) oF 69 37 29 107 Aanuitant farding and golicy lability movements”
Slide 40: Reconciliation of Statutory to Historic Cost
Consolidated Profit and Loss — Reconciliation of Statutory to Historic Cost Appendix ~ 2 $m FY.06 Fy 05 “2H 06 1H 06 2H 05 1405 Statutory net profit after tax 134 120 Ta 60 6 55 Recurring items i} Subtract excess of movement is Tair vatue af investment assets over accrsed investment income under his
Slide 41: Consolidated Profit and Loss Historic cost
Consolidated Profit and Loss — Historic cose Appendix - 3 $m FY06 FYO5 FYOa 2H 06 4H 06 2H 05 4H05 2H 04° 4H 04 income Net rental income SS 84 27 42 investment income 128 82 GF Realised gains 1 29 15 interest paid and seling costs 22) Chins 60} Net investment income 122 86 43 Fees received 458 287 2
Slide 42: Consolidated Balance Sheet AIFRS reconciliation
42 Consolidated Balance Sheet AIFRS reconciliation Appendix — 4 AMERS ALFRS, AGAAP $m $m Sm 4 July 2005 Movement 30 June 2005 Movement 30 Jume.2005 Assets . : Cesh aed cash equivalents A807 - 480.7 @) 96.4 Recelvables 1565 Ql 1583 3 288.9 Debt securities ~ - ~ 7843 753.9 Investment assets 1,060.8 54
Slide 43: Issued Share Capital EPS and DPS
Issued Share Capital EPS and DPS Appendix - 5 2HO6. 1HO06 2H05 1HOS 2HO4 AHO4 Ordinary Shares: Quoted (CGF) Opening 53z SILT? 934,269,048 528,441,068 2,866,703,735 2,439,035,735 Additions (+) . i) DRP 317,823 530,669 - - - - a) LTP 6,478,000: 3,548,000 5,828,006 - 427 668,000 - ai) CTP shares bought
Slide 44: Earnings per share
Earnings per share FY 06 FY 05 2H06 HOG 2H05 1HO5 Basic ~ seported statutory 24.9 227 13,7 11.2 12.4 10.6 Basic ~ underlying statutory 28.4 227 15.2 11.2 12.4 10.6 Basic — historic cost 21.6 159 16,8 10.8 TA 86 Diluted — reported statutory 239 22.7 13.9 V42 12.3 86 Diluted - underlying statutory 27.
Slide 45: Divisional Performance - Mortgage Management
45 Divisional Performance —- Mortgage Management Appendix - 6 $m Fy06 FYO5 FYO4 2H 06 1H 06 2H 05 1HO5 2H 04 1HOw income . Net Investment Income ce - ~ - - - Fees received 282 235 Foes and commissions paid Ga) Acquisition cost armortisatian (fay Net fee income 184 Otker incame a - - =. - = - - - Net
Slide 46: Mortgage Management Residential
Divisional Performance - Mortgage Management Residential Appendix - 6.1 sm FY06 FYO5 FYo4 2H 06 1H 06 2H05 1H05 2H 04 1H 04 income . Net Investment Income os ~ = = = Fees received 29 214 127 112 102 86 44 Fees and commissions pa:ct Vay (a3) (33) (32) i29) 4 Acquisit:on cas: amortisation (28. (38} (3
Slide 47: Mortgage Management Commercial
Divisional Performance - Mortgage Management Commercial Appendix - 6.2 $m FYO6 FYO5 FYO4 2H 06 4H 06 2H 05 1H 05 2H 04 41HO4 Income Net investment Income = ~ ~ = = ~ ~ Fees received 23. ral 22 42 Wd 10 tt an} a Fees and commissiors paid os - - - - - - - - Acquisition cost amnartisation a ” ~ a = - ~
Slide 48: Divisional Performance Funds Management
Divisional Performance Funds Management Appendix ~7 $m FYO6 FYOS FYO4 4H 06 2H 05 1H 08 2H 04 41H 04 income Net Investment Income Fees received Fees and commissions paid Acquisition cost amortisation Net fee income Other income Net income Expenses Employee expenses Other Total expenses ERIT Expense
Slide 49: Divisional Performance Asset Management
Divisional Performance Asset Management Appendix ~ § Historic cost? $m. FYO6 FYOS FYO4 2H 06 1H 06 2H O05 THOS 2H 04 1H 04 income . Net sental income 95 55 84 6. 49 2? 28 A2 A2 Investment income 108 138 82 50 50 67 at 44 38 Realised gains "$3 51 29 4 36 7 15 36 24 5 interest paid and selling costs “
Slide 50: Asset Management Balance Sheet
Asset Management Balance Sheet Appendix ~ 8.1 FYO6 1H 06 FY 05 $m. Stat & HC A Star HC a Cash 349 - 396 - 424 424 Debt investments 728 2 802 8 751 748 6 Equity and other investments 50 ® 82 22 176 170 6 Infrastructure investments 409 18 299 30 Net property investments’ 4,515 225 1,235 161 Investment
Slide 51: Divisional Performance Financial Planning
Divisional Performance Financial Planning Appendix - 9 sm FYO6. FYOS FY04 2H 06 4H 06 1H 05' 2H04 1H 64 income Net Total investment Income Fees received Feas end commissiars paid Acquisition cast amortisation Net fee income Other income’ Net income Expenses Employee expenses Other Total expenses Ear
Slide 52: Corporate
Corporate Appendix ~ 10 sm FYO6 FY0S FYO4 2H 06 4H 06 2H 05 1H 05" 2H 04 1H 04 income Net Income ~ ~ = ~ ~ - - Expenses : Employee expenses! 4): oy 10) Cither experses - 8) - ‘Total expenses By Eh 10} ERY fen} 1123 10} Interest and borrowing costs 2). 13) Gh Significant items {435 Net Profit/(Loss}
Slide 53: Group Assets and Loans under Management
Group Assets and Loans under Management Appendix - 14 Sm 2H06 4HOS 2H05 1805 2104 1HO4 Asset Menagement Boe Assets managed for the Life company Property! (1818 “22 1,329 969 823 B75 Debt nvestments (inicuding hybrids} and cash 1,055 1 284 “124 1,667 1,796 1,307 Infrastructure assets? 408 301 34a an
Slide 54: Reconciliation of Wealth Management segment reporting
Reconciliation of Wealth Management segment reporting to Funds Management and Financial Planning Appendix ~ 12 sm FYOS | FY 04 4H 06 2H 05 4H OS 2H 04 4H O04 Wealth Management EBIT reported wee under AGAAP néa 3 1 4) Less: Acquisition restructure adjustments under AIFRS © HSBC Asset Management acqui
Slide 55: Group EBIT & Operating Efficiency
Group EBIT & Operating Efficiency Operating efficiency Group EBIT (Historic cost} 250 20% 120 20% 100 ” 7 €0% ort 80 he py 5% 60 40% = ® 10 ® 46 20% 20% 20 50 10% 6 ot + o% 4H 04 2HO4 1H 05 2H OS 1H OS 2H 06 teow 2HO# 1HoS 2H 05 1Hos 2H 08 Net income —e— Cost ta income EBIT contribution by division
Slide 56: Divisional EBIT & Operating Efficiency
Divisional EBIT & Operating Efficiency Mortgage Management EBIT Operating efficiency - MM 0 50% 45 0 np 49% 36 = g 30 46% 2 28 485 LA — bh] 49% Pp 5 20 a . to 28% Hod DH Od 4HO5 2H 05 1H 08 2H 08 ° 36% tH Hos 1H 08 2H os tHos 24108 (het income gp Gost to income Funds Management EBIT Operating effici
Slide 57: Divisional EBIT & Operating Efficiency
Divisional EBIT & Operating Efficiency Asset Management EBIT (Historic cost) Operating efficiency » Ant 7 700 50% 60 on 5% a 40% n 25% ge 20% = 90 25% = 6 4 20% 10 a 159% 2 10% o 10 3% 1H 04 2HO4 aHOs 2H 05 1H 06 2H O68 D om tHot aos HOS aos HOG Ret income a Cost fo nese Financial Planning EBIT Oper
Slide 58: Glossary
Glossary NIM FM AM FP Corporate Net rental Income (AM only) Investment income (AM only) Realised gains (AM only) interest paid and selling expenses (AM only) Net investment income (AM only} Fees received Fees & commissions paid Mortgage Management division Funds Management division Asset Management
Slide 59: Glossary
Glossary Acquisition cost amortisation (MM onty) Net fee income Other income Net income Employee expense Other expense Significant items Net Assets Return on Net Assets (RONA) Amortisation of upfront payrnents to mortgage originators (deferred acquisition cosis) spread over expected average life of
Slide 60: Disclaimer
E_E_o_€_€_ TTT HTNTTRNATN OMT MMMMiiiiiiiiniiinnaniniyinitinitnt a HET HE Hc Lecce RE SEL ELa a RA REERE Disclaimer: The material in this presentation is general background information about Challenger Financial Services Group activities and is current at the date of the presentation. itis informati