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Investments. Mortgages. Possibilities. Challenger Wine Trust Annual Report 2007 Challenger Wine Trust (ARSN 092 960 060) Responsible Entity Challenger Listed Investments Limited (ABN 94 055 293 644) (AFSL 236887) Challenger Wine Trust For personal use only

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Page 1: C Wine Trust For personal use only

Investments. Mortgages. Possibilities.

Challenger Wine TrustAnnual Report 2007

Challenger Wine Trust(ARSN 092 960 060)

Responsible EntityChallenger Listed Investments Limited(ABN 94 055 293 644)(AFSL 236887)

Challenger W

ine Trust

Level 15255 Pitt StreetSydney NSW 2000telephone 02 9994 7000facsimile 02 9994 7777

www.challenger.com.au 57

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Investments. Mortgages. Possibilities.

Challenger W

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Challenger Listed Investments Limited(ABN 94 055 293 644) (AFSL 236887) (CLIL) isthe Responsible Entity of Challenger Wine Trust(ARSN 092 960 060) (CWT).

CLIL, as the Responsible Entity of CWT, has preparedthis Annual Report (Report) based on informationavailable to it. The information in this Report shouldbe regarded as general information only. Nothingcontained in this Report constitutes investment,legal, tax or other advice. It has been preparedwithout taking account of any person’s objectives,financial situation or needs. Recipients should,before acting on any such information, consider itsappropriateness, having regard to their objectives,financial situation and needs, and seek the assistanceof their financial or other licensed professionaladviser before making any investment decision.

Any investment in CWT is subject to investment riskand other risks, including possible loss of incomeand principal invested. None of CLIL, ChallengerManagement Services Limited (ABN 29 092 382 842)(AFSL 234678) (CMSL), Challenger Financial ServicesGroup Limited (ABN 85 106 842 371) (Challenger) or any other member of the Challenger Group givesany guarantee or assurance as to the performance of CWT or the repayment of capital.

Nothing in this Report should be considered asolicitation, offer or invitation to buy, subscribe for orsell any, or a recommendation of, financial products.

All reasonable care has been taken to ensure thatthe facts stated and opinions given in this Report are fair and accurate. To the maximum extentpermitted by law, the recipient releases CLIL, eachmember of the Challenger Group, their directors,officers, employees, representatives and advisersfrom any liability (including, without limitation, inrespect of direct, indirect or consequential loss ordamage or loss or damage arising by negligence)arising in relation to any recipient relying onanything contained in or omitted from this Report.

Challenger Wine Trust (CWT)ARSN 092 960 060

Australian Securities Exchange (ASX) codeCWT

Responsible EntityChallenger Listed Investments LimitedABN 94 055 293 644AFSL 236887

Directors of the Responsible EntityS Gerlach (Chairman)RRR HooperIM MartensGK McWilliamIR MooreRJ WoodsPR Brook

Company SecretaryC RobsonS Koeppenkastrop

ManagerChallenger Management Services LimitedABN 29 092 382 842

AddressLevel 15255 Pitt StreetSydney NSW 2000Telephone: +61 2 9994 7000Facsimile: +61 2 9994 7777Email: [email protected]: www.challenger.com.au/cwt

RegistryComputershare Investor Services Pty LtdLevel 5, 115 Grenfell StreetADELAIDE SA 5000Telephone: 1300 556 161Facsimile: +61 8 8236 2305Email: [email protected]: www.computershare.com

Any forward looking statements included in thisReport involve subjective judgement and analysisand are subject to significant uncertainties, risks andcontingencies, many of which are outside the controlof, and are unknown to, CLIL. In particular, theyspeak only as of the date of these materials, theyassume the success of CWT’s business strategies,and they are subject to significant regulatory,business, competitive and economic uncertaintiesand risks. Actual future events may vary materiallyfrom forward looking statements and assumptionson which those statements are based. Given theseuncertainties, recipients are cautioned not to placeundue reliance on such forward looking statements.

Any past performance information provided in thisReport is not a reliable indication of future performance.

CLIL does not receive any specific remuneration forany general advice which may be provided to you inthis Report. However, CLIL and CMSL receive trusteeand management fees as Responsible Entity andManager of CWT, respectively. For more details onfees, please refer to the Financial Report containedin this Report and additional information on theAustralian Securities Exchange (ASX) websitewww.asx.com.au. Financial advisers (including someChallenger Group companies) may receive fees orcommissions if they provide advice to you or arrangefor you to invest in a Challenger product (includingCWT). CLIL and its associates may have an interestin the financial products referred to in this Reportand may earn fees or other benefits as a result oftransactions in any such financial products.

Members of the Challenger Group and their officersand directors may hold securities in CWT from timeto time.

Important notice Directory

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CWT owns a portfolio of 28 commercial vineyards located across wine growing regions

of Australia and New Zealand. The vineyards are 100% leased to quality wine companies

or grape growers with secure grape contracts.

Chairman’s letter 2

Investment strategy and highlights 4

Fund Manager’s report 6

About Challenger 11

Portfolio summary 12

Corporate governance statement 24

Financial report 28

Unitholder information 78

Directory IBC

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2007

Dear unitholders,

On behalf of the CLIL Board, I am

pleased to present Challenger Wine

Trust’s (CWT’s) annual report for the

2007 financial year.

CWT has again generated a stable

distribution return for unitholders.

The high level of predictability associated

with CWT’s net operating income

comes as a direct result of its simple

structure and the highly transparent

nature of its rental income stream and

management costs.

The vineyard sector has experienced an

interesting year, with initial projections

of oversupply eliminated following the

impact of frost, fire and drought, which

together significantly reduced the size

of the 2007 Australian harvest. The

ongoing impact of the drought and

reduced water availability has had

some impact on valuations across warm

climate vineyards, negatively affecting

the valuation of some of CWT’s assets.

The uncertainty over future water

allocations along the Murray River

remains a key issue for the industry

in the months ahead.

Over the course of the year the

management team have spent

considerable time assessing opportunities for

the portfolio which are both consistent

with CWT’s strategic objectives and

create additional value for unitholders.

The newly acquired Miamba vineyards

met this criteria, being accretive

to distributions as well as enhancing

portfolio quality and diversification.

To further strengthen the

security of CWT’s income, a number of

assets have now also been identified for

disposal in the year ahead.

Importantly, steps have also been taken

to improve CWT’s capital structure,

with the suspension of the distribution

reinvestment plan and the conversion

of PICE units to ordinary units removing

the potential for further dilutionary

impact to distributions and enhancing

funding flexibility.

In my role as Chairman I draw on the

extensive skills and experience of the

CLIL Board’s executive and non-executive

directors. Over the course of the 2007

financial year the Board has monitored

the potential impact of changing

industry conditions on CWT’s portfolio,

supporting management’s decision

to offer a number of assets up for sale

that no longer meet the Trust’s

investment criteria. We have also

overseen the successful transition of

management responsibilities to the

Sydney office and the appointment

of a new Fund Manager.

As we commence the 2008 financial

year, CWT continues to offer investors

exposure to a high quality vineyard

portfolio which generates secure income

returns. Initiatives underway to enhance

portfolio quality should see this continue

in the year ahead.

I would like to thank you for your

support of CWT over the course of

the 2007 financial year, and look

forward to reporting to you on its

future performance.

Chairman’s letter

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…CWT continues to offer investorsexposure to a high quality vineyardportfolio which generates secureincome returns…

Stephen Gerlach

Chairman

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Investment strategy

2007

CWT aims to provide investors with exposure to a diversified portfolioof high quality, well located vineyards which offer secure and predictableincome returns and potential for capital growth.

Investmentstrategy andhighlights

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Highlights

5

CWT delivered profit from operatingactivities of $14.3 million for the year,up 8.8% on a comparable basisagainst the 2006 result. The keydrivers of this stronger performancewere growth in net property incomeand lower borrowing costs.

After accounting for new units issued during the year, CWT paid adistribution of 9.10 cents per unit,reflecting growth of 0.4% over thedistribution of 9.06 cents in theprevious year.

At 30 June 2007, CWT had a gearingratio of 45.2%, increasing to 47.4%following funding of the acquisition of Miamba Vineyards announcedfollowing year end.

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Uncertainty over water availability atAustralian warm climate vineyardslocated along the Murray Rivercontributed to a net downwardmovement of $4.5 million overprevious asset valuations, equivalent toapproximately 1.6% of total portfoliocarrying value.

Weather conditions have negativelyimpacted the size of the Australian2007 grape harvest and 2008production forecasts. This is expectedto have a positive impact on grapeprices and vineyard sector profitabilitygenerally.

At 30 June 2007, CWT’s netasset value (NAV) per unit andnet tangible assets (NTA) per unit were $0.92 and $0.82 respectively.

The CWT portfolio remains 100%occupied, has a long weighted average lease term of 5.9 years and is well diversified by region, tenant and grape variety.

Following year end, CWT acquired theMiamba Vineyards. This acquisitionimproved CWT’s distribution profileand enhanced portfolio diversification.

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Financial resultsCWT delivered profit from operating

activities of $14.3 million for the year, up

8.8% on a comparable basis against the

2006 result.

The key driver of this stronger performance

was growth in net property income, up 2.8%

from $28.1 million in 2006 to $28.9 million.

This growth was the result of new income

from development projects nearing

completion, as well as the net uplift from

annual rental reviews across the portfolio.

Lower borrowing costs following the conversion

of PICE units (which were recognised as debt) to

ordinary units in April 2007, also contributed

to this positive result.

After inclusion of the unrealised impact of

the negative movement in the fair value of

non-current assets of $6.4 million, CWT’s

net profit for the period was $7.9 million.

DistributionsCWT’s distributable income for the year

was $14.3 million, up from $13.2 million in

2006. After taking into account new units

issued during the year under the distribution

reinvestment plan (DRP) and PICE unit

conversion, this equated to 9.10 cents per

unit, reflecting growth of 0.4% over the

9.06 cents per unit distribution for the

2006 financial year.

Fund Manager’s report

Dear unitholders,

In my first annual report as FundManager, I am pleased to reportto unitholders on the financialperformance and operations ofCWT for the 2007 financial year.

CWT’s 2007 financial results arerobust, reflecting 100% occupancyof the portfolio, as well as theprogression of vineyard developmentprojects and lower overall costs.Importantly, the structure of CWT’slease arrangements has insulated its rental income stream from theongoing effects of frost and drought.

In order to generate and maintainattractive, predictable income returnsto investors, CWT focuses onvineyards which are able to supportlong-term, sustainable operations.This continues to be achieved via theinvestment in a blend of both largescale commercial vineyards in warmclimate regions which provide grapesfor low cost wine producers, andvineyards in cool climate premiumgeographic regions which have global varietal presence and strongbrand support.

Our ongoing focus on improvingportfolio quality and diversificationhas resulted in the acquisition of Miamba Vineyards and the decision to sell a number ofproperties that no longer meet the Trust’s investment criteria.

2007

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AnnualReport

2007Change to accounting treatmentof water rightsFollowing discussions and agreement with

ASIC as to the appropriate treatment of

water rights under AIFRS, CWT has

determined to treat water rights associated

with its warm climate vineyards as intangible

assets recorded at cost. This change was

reflected in both 2007 asset values and prior

period comparatives.

Recognising water rights at cost rather than

fair value has resulted in a write down of

30 June 2006 asset values of $2.3 million,

with the restated 30 June 2006 Net Asset

Value (NAV) per unit now $0.94 (previously

$0.96). In addition, the recognition of

$15.8 million as intangible assets at 30 June

2006 resulted in Net Tangible Assets (NTA)

per unit being restated to $0.84 (previously

$0.96).

For the year ended 30 June 2007 a further

write down of $1.9 million was recorded

due to recognising intangible assets at cost.

This change in accounting treatment has

no impact on the underlying economic

value of CWT’s properties.

NAV/NTA per unitAt 30 June 2007, CWT’s NAV and NTA per

unit reflected the negative impact of asset

revaluations ($4.5 million), the write down

due to recognition of water rights at cost

($1.9 million) and additional units issued

following the PICE unit conversion in April

2007. These factors were partially offset

by fair value increments in interest rate

cash flow hedges and other movements,

resulting in NAV per unit and NTA per unit

both falling $0.02 to $0.92 and $0.82 per

unit respectively.

Capital managementAt 30 June 2007, CWT had total borrowings

of $134.4 million, and a gearing ratio of

45.2%. This gearing ratio is significantly

below prior periods, reflecting the conversion

of PICE units (categorised as debt) to ordinary

units in April 2007. Both the conversion

of PICE units and the suspension of the DRP

in August 2006 have simplified the Trust’s

capital structure and removed the potential

dilution to unitholder returns in the future.

CWT’s borrowings are denominated in a

mix of Australian and New Zealand currency.

The New Zealand borrowings of $82 million

account for 99% of the value of the

New Zealand portfolio, effectively providing a

natural foreign exchange hedge on their value.

All of the borrowings are at fixed rates, either

directly or through the overlay of interest rate

hedges. By locking in the cost of borrowings

at acquisition for the term of each lease, CWT

has a high degree of certainty on its funding

costs. At 30 June 2007, CWT’s weighted

average cost of borrowing was 7.7%.

Following the acquisition of the Miamba

Vineyards after year end, CWT’s total

borrowings have increased to $146.7 million,

bringing its gearing ratio to 47.4%, remaining

within its preferred range of 45-55%.

Investment performanceCWT recorded a total return of 35.2% for the

year to 30 June 2007, driven by a recovery in

its unit price from $0.70 at 30 June 2006 to

$0.85 at the conclusion of this financial year.

Over the longer term, CWT has delivered a

five year annual compound return of 10.8%

per annum to unitholders.

2

4

6

8

10

FY00

8.55

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2

4

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10

FY02

FY04

FY06

9.54

9.24

9.16 9.36

9.12

9.06

9.10

cpu

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0.7777

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94 97

cpu

FY01

FY03

FY05

FY07

0

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60708090

94 92

84 82

NTA

NTA

NA

V

NA

V

Distribution history

2

4

6

8

10

FY00

8.55

0

2

4

6

8

10

FY02

FY04

FY06

9.54

9.24

9.16 9.36

9.12

9.06

9.10

cpu

1999

0.000

0.11

0.222

0.333

0.444

0.55

0.666

0.77

0.888

0.999

2000

2001

2002

88

01020304050

100

88 87 86 86

94 97

2003

2004

2005

2006

2007

cpu

FY01

FY03

FY05

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0

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94 92

84 82

NTA

NTA

NA

V

NA

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NTA/NAV history

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2007

Portfolio updatePortfolio strategyCWT’s investment objective is to generate

and maintain attractive, predictable income

returns to investors, with potential for

capital growth. To achieve this objective,

CWT invests in vineyards which are 100%

leased to premium brand wine and/or

multinational wine companies or contract

growers to industry companies.

In targeting vineyards which offer high gross

margins per hectare, CWT invests in either:

(a) large scale commercial vineyards in

warm climate regions which provide

grapes for low cost wine producers

that are targeting high production yields

but achieve low relative grape prices.

Examples include vineyards in the

Waikerie, South Australia and Riverina

and Sunraysia regions of NSW;

(b) vineyards in cool climate premium

geographic regions which have global

varietal presence and strong brand

support that have lower relative

production yields but target higher grape

prices. Examples include the Barossa Valley

for shiraz and the Marlborough region

in New Zealand for sauvignon blanc.

Overlaying this investment criterion is a

preference to reduce income risk via

maintaining a high level of region, tenant,

water source and varietal diversification.

This approach is adopted when assessing

the suitability of both existing and new

properties for the portfolio.

Portfolio activityThe CWT portfolio is 100% occupied, has a

long weighted average lease term of 5.9 years

and is well diversified by region, tenant and

grape variety.

Strong relationships with tenants remain key

to the ongoing success of the Trust. During

the year, lease extensions were negotiated

for McGuigan Simeon Wines at Hermitage

Road Winery and Sandy Hollow, Cowra

and Waikerie Vineyards for varying periods.

In addition, Grant Burge Wines has also

agreed to an extension of its lease at

Summers Hill Vineyard for a further five years.

After excluding assets planned for sale,

portfolio expiries in the next two years are

limited to Grant Burge Wines’ tenancy at

Corryton Park and McGuigan Simeon Wines’

tenancies at Cowra, Bethany Creek and Vine

Vale Vineyards, which together account for

only 3.3% of FY08 portfolio income.

On 20 August 2007, Evans & Tate, which

is a tenant at CWT’s Gnangara, Cocoparra

and Woods Vineyards, announced the

appointment of an Administrator and Receiver

and Manager. In the year to 30 June 2007,

rent on these properties totalled $1.7 million,

equivalent to 5.8% of CWT’s net property

income for the year. CWT is awaiting contact

from the Administrator and Receiver and

Manager in relation to their intentions

regarding Evans & Tate’s leases with CWT.

DevelopmentsFollowing the completion of development at

the Del Rios, Crownthorpe and Poole Rock

Vineyards, the majority of CWT’s development

vineyards are now fully operational. These

development vineyards have adopted industry

best practice viticulture production methods,

resulting in sustainable production yields and

good quality fruit.

n 5.7% Grant Burge Wines

n 34.3% McGuigan Simeon Wines

n 14.5% Pernod Ricard Pacific

n 3.2% BH & SE Booth Auction Services

n 1.1% Fosters Group

n 5.2% Green Valley Properties

n 25.1% Delegat’s Group

n 5.2% Evans & Tate

n 5.7% Other

n 30.0% SA

n 25.0% NSW

n 3.1% WA

n 16.7% VIC

n 25.2% NZ

n 30.0% SA

n 25.0% NSW

n 3.1% WA

n 16.7% VIC

n 25.2% NZ

Tenant diversification summary*(by value)

Geographic diversification*(by value)

*Includes Miamba Vineyards which were acquired on 17 August 2007.For

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2007RevaluationsIndependent valuations, which take into

consideration the value of the land, vines,

infrastructure and water rights which

collectively reflect the underlying economic

value of the properties, remain the most

appropriate reflection of the market value

of the vineyards.

In the year to 30 June 2007, a net downward

movement of $4.5 million over previous asset

valuations was recorded. This fall was largely

driven by the impacts of the current drought

and uncertainty over future water availability

on vineyard profitability forecasts at Australian

warm climate vineyards located along the

Murray River.

AcquisitionsA core focus for the CWT management

team has been sourcing new opportunities.

The recent acquisition of the Miamba

Vineyards met all of CWT’s investment criteria

– improving the Trust’s distribution profile

whilst enhancing portfolio diversification.

In August 2007, CWT announced the

acquisition of the Miamba Vineyards from

Grant Burge Wines for $11.5 million (plus

costs). The properties were acquired under

a sale and lease back arrangement with

Grant Burge Wines, which has entered into

an initial eight year lease with an option to

renew for three further four year periods.

The Miamba Vineyards add to CWT’s growing

portfolio of premium brand cool climate

vineyards in Australia. Located in the southern

end of the Barossa Valley, South Australia’s

premium wine growing region, the Miamba

Vineyards comprise an aggregation of five

vineyards which together provide grapes

for many of Grant Burge Wines’ premium

wines, including the Barossa Vines, Miamba,

Filsell, Chaff Mill, Cameron Vale, and

Meshach brands.

Grant Burge Wines was attracted to CWT’s

business model, which provides it with an

opportunity to release capital for investment,

whilst still allowing the flexibility to retain

operational control over the vineyards.

DisposalsFollowing ongoing discussions with McGuigan

Simeon Wines, three properties have been

identified as no longer meeting CWT’s future

vineyard requirements.

The first of these is the Grande Junction

development vineyard located in Wentworth,

NSW. In February 2007, the development

was discontinued and all development

costs incurred to date of $6.0 million were

reimbursed to CWT. A further $0.9 million

will be paid by McGuigan Simeon Wines in

September 2007 to purchase the land.

Hermitage Road Winery and Sandy Hollow

Vineyard, which have leases to McGuigan

Simeon Wines expiring in June 2008 and

April 2009 respectively, are currently being

marketed for sale. The proposed sale of these

assets, which are both smaller, older style

properties, will minimise any risk to income

that may arise during the re-leasing period

and enhance the overall quality of the CWT

portfolio.

CWT has also contracted to sell Trillians

Hill Vineyard to the current tenant for

$1.1 million by December 2007.

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Australian industry conditionsThe 2007 grape harvest is estimated to have

been 1.35 million tonnes, the smallest since

2000. This was due to weather conditions,

including frost in the cooler climate regions

of South Australia, Victoria and Western

Australia, and drought in warm climate

regions, particularly the Murray Darling Basin.

The reduction in 2007 supply has significantly

lowered the existing grape surplus, with wine

companies lowering their inventory to meet

current demand. Industry organisations are

predicting supply-demand balance could occur

as early as the 2008 harvest, with the impact

of 2007 season frosts on vine development

and reduced water availability likely to again

reduce production. The current industry

forecast for the 2008 harvest is 1.5 million

tonnes which remains significantly below

the 1.9 million tonnes produced in 2006.

The reduced supply outlook coupled with

steady growth in demand is starting to have

a positive impact on grape prices, following

increases in prices for both bulk and bottled

wine for both domestic and export markets.

Water availability for the 2008 harvest remains

a critical issue, particularly for warm climate

regions dependent on irrigation water

allocations from the Murray River.

Current irrigation water allocations remain

below previous years at 60% for NSW

(high security), 5% for Victoria and 13%

for South Australia.

Some vines in these regions are being pruned

back in order to reduce water use, which will

result in reduced production for the 2008

harvest. However, these vines should not

suffer any long-term impact to productivity

in future years.

CWT’s rental income stream is backed by

long-term leases with fixed rental structures

and is therefore not directly impacted by

current industry conditions. However,

valuations of CWT’s vineyards dependent on

the Murray River have experienced downward

movements as a result of the uncertainty

regarding water allocations impacting forecast

vineyard profitability.

OutlookThroughout the 2007 financial year CWT has

continued to deliver a stable and predictable

income return to unitholders. This is expected

to continue into the 2008 financial year,

with the recent acquisition and planned sale

of assets identified as non-core forecast to

enhance returns whilst also improving overall

portfolio quality and diversification.

The impact of weather conditions and

water availability along the Murray River will

remain a key issue for the Australian vineyard

sector in 2008. CWT will continue to work

with its tenants in these regions to ensure

rental income remains secure and the capital

value of the portfolio is not impacted over the

longer term.

Thank you for your continued support of

the Challenger Wine Trust over the 2007

financial year.

Yours sincerely,

Nick Gill

Fund Manager

2007

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Ch

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AnnualReport

2007Challenger Financial Services Group

(Challenger) is listed on the Australian

Securities Exchange and is a member of

the S&P/ASX 100. Created from the merger

between Challenger International Limited

and CPH Investment Corp in mid 2003,

Challenger has emerged as a mainstream

player in Australian financial services –

broadening and sharpening its focus, making

acquisitions, forging alliances and exiting

non-core businesses. At 30 June 2007,

Challenger had a market capitalisation

of $3.2 billion and approximately 1,000

employees.

Challenger has four complementary

divisions, Asset Management, Funds

Management, Financial Planning and

Mortgage Management. At 30 June 2007,

Challenger’s assets and loans under

management, administration and advice

totalled $52.8 billion.

Challenger AssetManagementChallenger’s specialised funds are operated

from within Challenger’s Asset Management

division. Challenger Asset Management is

a highly skilled manager and originator

of infrastructure, real estate and fixed income

assets. This expertise is applied to the creation

and ongoing management of its specialised

real estate and infrastructure funds, as well

as Challenger’s direct investment in these

asset classes.

Since its entry into the specialised funds

sector, Challenger has successfully listed

three specialised funds on the ASX,

with assets sourced from Australia, Japan,

the US, the UK and Europe.

Today, Challenger Asset Management has

responsibility for the management of assets

totalling $6.6 billion.

Recognised as an innovative and dynamic

performance focused manager, Challenger’s

Asset Management division has attracted a

highly skilled team with expertise in both the

creation and management of specialised

funds. To complement these skills, it has also

invested to attract industry professionals with

asset origination and management capabilities

across its three core asset classes.

As part of the Asset Management division,

each specialised fund team draws on this

pool of highly skilled resources from three

main areas:

• Fund management – Each specialised

fund has a dedicated fund management

team to manage the fund in accordance

with its investment strategy. This team

drives the fund’s strategic direction and

overall performance, with responsibility

for assessment of transactions, ongoing

management of the asset portfolio, and

financial and capital management.

• Asset origination – Each asset class has a

devoted origination team, with

responsibility for identifying and assessing

new opportunities for the specialised

funds and Challenger’s direct investment

portfolio. Located in both Sydney and

London, these teams have highly skilled

resources with deep industry relationships

and a proven track record in securing

assets which deliver value.

• Support services – As part of the Asset

Management division, the specialised

funds are able to draw upon a broad

support base to assist in managing the

fund and executing transactions. These

skills include finance, treasury, legal,

compliance, taxation, structuring, investor

relations and company secretarial

resources.

Challenger Asset Management has a strong

co-investment philosophy, and has invested

alongside investors in all of its specialised

funds. This alignment of manager and

investor is further enhanced by the use

of performance fees that reward relative

rather than absolute performance.

Support

origination

services

Asset

Fundmanagement

AboutChallenger

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portfolio summary

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Total Area Occupancy WALE (by CarryingProperty Tenant area planted (by area) income) Valuation value

ha ha % yrs date $m

Australia

Dalswinton and Inglewood Vineyards 127 96 100 2.1 Dec-06 5.7Inglewood Vineyards

Chapel Vineyard National Viticultural 37 30 100 4.5 Dec-06 2.8Fund of Australia

Boh River Vineyard BH & SE Booth Auction Services 373 194 100 3.0 Dec-06 9.4

Sandy Hollow Vineyard McGuigan Simeon Wines 203 105 100 1.8 Dec-06 2.8

Qualco East Vineyard McGuigan Simeon Wines 214 171 100 8.5 Jun-07 6.8

Bethany Creek and McGuigan Simeon Wines 25 19 100 1.3 Dec-06 1.7Vine Vale Vineyards

Whitton Vineyard McGuigan Simeon Wines 102 98 100 7.8 Dec-06 3.8

Waikerie Vineyard McGuigan Simeon Wines 43 38 100 5.8 Dec-06 1.9

Cowra Station Vineyard McGuigan Simeon Wines 68 58 100 1.8 Dec-06 3.5

Balranald Vineyard McGuigan Simeon Wines 479 403 100 9.4 Jun-07 21.2

Schubert’s Vineyard McGuigan Simeon Wines 108 76 100 4.0 Dec-06 6.2

Hermitage Road Winery McGuigan Simeon Wines 40 – 100 1.0 Jun-07 3.9

Grande Junction Vineyard McGuigan Simeon Wines 572 – 100 13.0 Jul-05 0.9

Del Rios Vineyard McGuigan Simeon Wines 1,048 932 100 9.0 Jun-07 50.0

Gundagai Vineyard Green Valley Properties 289 239 100 3.2 Dec-06 15.6

Summers Hill Vineyard Grant Burge Wines 28 18 100 0.6 Dec-06 1.5

Corryton Park Vineyard Grant Burge Wines 54 42 100 0.6 Dec-06 3.1

Richmond Grove and Pernod Ricard Pacific 581 483 100 6.0 Jun-07 43.5Lawsons Vineyards

Cocoparra and Evans & Tate 496 266 100 5.8 Dec-06 9.7Woods Vineyards

Gnangara Vineyard Evans & Tate 257 101 100 5.8 Dec-06 5.9

Pooles Rock Vineyard Pooles Rock Wines 21 9 100 7.3 Dec-06 7.5and Winery

Trillians Hill Vineyard Trillians Hill Vineyard 41 24 100 9.9 Apr-05 1.1

Sirens Estate Vineyard Foster’s Group 66 44 100 4.9 Dec-06 3.2

Australiatotal/average 5,272 3,446 100 6.0 – 211.7

New Zealand

Dashwood Vineyard Delegat’s Group 197 167 100 5.3 Dec-06 23.2

Rarangi Vineyard Delegat’s Group 142 129 100 7.0 Dec-06 17.7

Gimblett Vineyards Delegat’s Group 45 40 100 3.8 Jun-07 6.7

Crownthorpe Vineyard Delegat’s Group 361 291 100 3.8 Jun-07 27.7

New Zealandtotal/average 745 627 100 4.9 – 75.3

Total/Average 6,017 4,073 100 5.8 – 287.0

Acquisition post30 June 2007

Miamba Vineyards Grant Burge Wines 205 118 100 8.0 Jun-07 12.4

Total/Average 6,222 4,191 100 5.9 – 299.4

Property summary

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Ownership interest 100% 100% 100%

Total area 127 ha 37 ha 373 haArea planted 96 ha 30 ha 194 haTenant Inglewood Vineyards National Viticultural Fund BH & SE Booth Auction Services

of AustraliaOccupancy 100.0% 100.0% 100.0%Lease expiry date July 2009 December 2011 June 2010WALE 2.1 years 4.5 years 3.0 yearsReview type/s Subject to grape price movements Increased on anniversary of Increased on anniversary of

with 4% cap on increase. lease by CPI. lease by CPI.FY07 net property income $0.630 million $0.34 million $1.11 millionDate acquired/established July 1999 December 2001 June 2006Purchase price $5.9 million $2.7 million $8.3 millionCarrying value $5.7 million $2.8 million $9.4 million*Valuation $5.8 million $2.8 million $9.3 million*Valuation date December 2006 December 2006 December 2006

Boh River Vineyard

Loxton, SA

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DescriptionInglewood Vineyard is located in theHunter Valley region, in New SouthWales. The vineyard is currentlybenefiting from a replanting programto favoured varieties which began in2005. Grapes from this vineyard gointo the Two Rivers range of wines.

DescriptionChapel Vineyard is located in theCoonawarra region of South Australia,a cool climate region famous for itspremium wines, particularly CabernetSauvignon. The vineyard is plantedto Cabernet Sauvignon, and grapesfrom the vineyard go into the Foster’sGroup range of premium wines fromthe region.

DescriptionBoh River Vineyard is located in theRiverland region of South Australia.It is a large scale, warm climatevineyard which produces varietalsincluding Chardonnay, Semillon,Verdelho, Cabernet Sauvignon,Grenache, Merlot, and Shiraz.A grape supply contract is inplace with Foster’s Group for allfruit produced at this vineyard.

Dalswinton andInglewood Vineyards

Hunter Valley, NSW

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100

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0

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0% 0% 0%0%

Chapel Vineyard

Coonawarra, SA

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0%0% 0% 0% 0%

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Lease expiry profile (by income)

*Boh River Vineyard valuation at December 2006 did not include permanent waterpurchased in the 2007 year. Carrying value includes value of additional permanent water.

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DescriptionSandy Hollow Vineyard is located inthe Hunter Valley, New South Wales.The vineyard has a mixture of oldand new plantings, and grows awide variety of grapes, includingChardonnay, Riesling, SauvignonBlanc, Shiraz, Semillon, CabernetSauvignon, Merlot. Grapes fromthis vineyard go into the McGuiganSimeon Wines range of Hunter Valley wines.

Ownership interest 100% 100% 100%

Total area 203 ha 214 ha 25 haArea planted 105 ha 171 ha 19 haTenant McGuigan Simeon Wines McGuigan Simeon Wines McGuigan Simeon WinesOccupancy 100.0% 100.0% 100.0%Lease expiry date April 2009 December 2015 October 2008WALE 1.8 years 8.5 years 1.3 yearsReview type/s Increased on anniversary of Increased on anniversary of Increased on anniversary of

lease by CPI. lease by a fixed 1.5%. lease by CPI.FY07 net property income $0.55 million $0.87 million $0.19 millionDate acquired/established November 1998 December 2003 October 1998Purchase price $4.2 million $7.0 million $1.5 millionCarrying value $2.8 million $6.8 million $1.7 millionValuation $3.8 million $8.6 million $1.7 millionValuation date December 2006 June 2007 December 2006

Bethany Creek andVine Vale Vineyards

Barossa Valley, SA

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0

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Hunter Valley, NSW

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100

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0

20

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0%0%

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0% 0% 0%0%

Qualco East Vineyard

Waikerie, SA

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40

60

80

100

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0%0% 0% 0% 0% 0%

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DescriptionQualco East Vineyard is located in theRiverland region of South Australia.It is a large scale, warm climatevineyard which produces majorvarietals, being Chardonnay, Shiraz,Cabernet Sauvignon and Merlot.Grapes from this vineyard go intothe McGuigan Simeon Wines rangeof wines.

DescriptionThe Bethany Creek and Vine ValeVineyards are located in the BarossaValley in South Australia, a coolclimate region which is famous forits premium wines, particularly Shiraz.Vineyard management practicesincluding hand pruning are used tomaximise the quality of the Shiraz,Chardonnay and Riesling grapevarieties grown on the property thatgo into the McGuigan Simeon WinesTempus Two and premium wine range.

Lease expiry profile (by income)

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Ownership interest 100% 100% 100%

Total area 102 ha 43 ha 68 haArea planted 98 ha 38 ha 58 haTenant McGuigan Simeon Wines McGuigan Simeon Wines McGuigan Simeon WinesOccupancy 100.0% 100.0% 100.0%Lease expiry date April 2015 April 2013 April 2009WALE 7.8 years 5.8 years 1.8 yearsReview type/s Increased on anniversary of Increased on anniversary of Increased on anniversary of

lease by CPI. lease by CPI. lease by CPI.FY07 net property income $0.35 million $0.24 million $0.44 millionDate acquired/established April 2005 October 1998 April 1998Purchase price $3.5 million $1.9 million $3.4 millionCarrying value $3.8 million $1.9 million $3.5 millionValuation $3.8 million $2.0 million $3.5 millionValuation date December 2006 December 2006 December 2006

Cowra Station Vineyard

Cowra, NSW

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DescriptionCowra Station Vineyard is locatedin the Cowra Region of New SouthWales. The vineyard has a heavyweighting towards white grapevarieties due to the site and regionalcharacteristics. Main varietals includeChardonnay, Semillon, SauvignonBlanc, Verdelho, Shiraz and Merlot.Grapes from this vineyard go intothe McGuigan Simeon Wines rangeof wines.

Whitton Vineyard

Whitton, NSW

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DescriptionWhitton Vineyard is located nearGriffith, New South Wales. It is alarge, warm climate vineyard whichproduces major varietals includingChardonnay, Colombard, Semillonand Shiraz. Planning is underway toimprove the efficiency of this vineyardthrough transition to a drip irrigationsystem. Grapes from this vineyard gointo the McGuigan Simeon Winesrange of wines.

Waikerie Vineyard

Waikerie, SA

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100

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DescriptionWaikerie Vineyard is located in theWaikerie region of South Australia.The vineyard produces severalvarietals including Chardonnay,Colombard, Gordo, Verdelho,Cabernet Sauvignon, Grenache,Merlot, and Shiraz. Grapes fromthis vineyard go into the McGuiganSimeon Wines range of wines.

Lease expiry profile (by income)

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Ownership interest 100% 100% 100%

Total area 479 ha 108 ha 40 haArea planted 403 ha 76 ha 0 haTenant McGuigan Simeon Wines McGuigan Simeon Wines McGuigan Simeon WinesOccupancy 100.0% 100.0% 100.0%Lease expiry date November 2016 May 2011 June 2008WALE 9.4 years 4.0 years 1.0 yearsReview type/s Increased on anniversary of Increased on anniversary of Increased on anniversary of

lease by a fixed 1.5%. lease by CPI. lease by CPI.FY07 net property income $2.38 million $0.64 million $0.46 millionDate acquired/established December 2003 July 2001 October 2001Purchase price $20.7 million $4.2 million $4.0 millionCarrying value $21.2 million $6.2 million $3.9 millionValuation $22.5 million $6.2 million $4.5 millionValuation date June 2007 December 2006 June 2007

Schubert’s Vineyard

Adelaide, SA

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100

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0

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DescriptionSchubert’s Vineyard is located inthe Adelaide Hills region of SouthAustralia. The vineyard is solelyplanted to white grape varieties,namely Chardonnay, Sauvignon Blanc,Riesling and Traminer. Grapes fromthis vineyard go into Earths Portraitand other McGuigan Simeon Wineswine brands.

Hermitage Road Winery

Hunter Valley, NSW

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100

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DescriptionHermitage Road Winery is locatedin the Hunter Valley in New SouthWales. This property is a 4,000 tonne crush capacity winery with storage capacity (includingfermentation tanks) of 6,300,000litres. The site also includes a cellardoor and restaurant.

Balranald Vineyard

Balranald, NSW

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100

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100%

DescriptionBalranald Vineyard is located on theMurrumbidgee River in New SouthWales. This large scale, warm climatevineyard is planted to Chardonnay,Cabernet Sauvignon, Colombard,Semillon, Shiraz, Ruby Cabernet andMerlot. Grapes from the vineyard gointo the McGuigan Simeon Winesrange of wines.

Lease expiry profile (by income)

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Grande JunctionVineyard

Wentworth, NSW

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100

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0

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0%0% 0% 0% 0% 0%

100%

Ownership interest 100% 100% 100%

Total area 572 ha 1,048 ha 289 haArea planted 0 ha 932 ha 239 haTenant McGuigan Simeon Wines McGuigan Simeon Wines Green Valley PropertiesOccupancy 100.0% 100.0% 100.0%Lease expiry date June 2020 June 2016 September 2010WALE 13.0 years 9.0 years 3.2 yearsReview type/s Increased on anniversary of Increased on anniversary of Increased on anniversary of

lease by CPI. lease by a fixed 1.5%. lease by CPI.FY07 net property income $0.45 million $4.87 million $1.86 millionDate acquired/established June 2005 June 2003 September 2000Purchase price $0.9 million $16.9 million $7.0 millionCarrying value $0.9 million $50.0 million $15.6 millionValuation n/a $50.0 million $16.0 millionValuation date n/a June 2007 December 2006

DescriptionGrande Junction Vineyard is locatednear Wentworth in New South Wales.Following the agreement betweenCWT and McGuigan Simeon Wines,this development will not proceed.McGuigan Simeon Wines hasreimbursed CWT for all developmentexpenditure incurred to date, and will repurchase the property inSeptember 2007.

Del Rios Vineyard

Boundary Bend, VIC

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DescriptionDel Rios Vineyard is the Trust’s singlelargest vineyard and one of the largestin Australia. Located on the MurrayRiver in Victoria, it is planted to mostmajor grape varietals including Shiraz,Cabernet Sauvignon, Chardonnayand Sauvignon Blanc. The grapesproduced from this vineyard go intothe McGuigan Simeon Wines rangeof wines.

Gundagai Vineyard

Gundagai, NSW

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100

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0% 0%0% 0%

DescriptionGundagai Vineyard is located nearGundagai in New South Wales. It isa large scale vineyard which producesmajor varietals including Chardonnay,Cabernet Sauvignon, Merlot andShiraz. Grapes from this vineyardare contracted to Foster’s Group.

Lease expiry profile (by income)

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Ownership interest 100% 100% 100%

Total area 28 ha 54 ha 581 haArea planted 18 ha 42 ha 483 haTenant Grant Burge Wines Grant Burge Wines Pernod Ricard PacificOccupancy 100.0% 100.0% 100.0%Lease expiry date February 2008 February 2008 May 2012WALE 0.6 years 0.6 years 6.0 yearsReview type/s Increased on anniversary of Increased on anniversary of Increased on anniversary of

lease by CPI. lease by CPI. lease by a fixed 1.5% to 2009and by a fixed 0.75% for theremaining lease term.

FY07 net property income $0.16 million $0.33 million $4.61 millionDate acquired/established February 2008 February 1998 July 2003Purchase price $1.3 million $1.0 million $43.3 millionCarrying value $1.5 million $3.1 million $43.5 millionValuation $1.5 million $3.1 million $43.5 millionValuation date December 2006 December 2006 June 2007

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Eden Valley, SA

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0

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DescriptionCorryton Park Vineyard is located inthe cool climate Eden Valley regionof South Australia. The vineyard isplanted to varietals of CabernetSauvignon, Merlot and Petit Verdotthat go into the Grant Burge labelledrange of wines.

Summers Hill Vineyard

Eden Valley, SA

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DescriptionSummers Hill Vineyard is located inthe Eden Valley, South Australia, acool climate region famous for itsChardonnay and Riesling. Mainvarietals planted include Chardonnay,Pinot Noir and Riesling. The grapes ofthis vineyard are of a very high qualityand go into the Grant Burge labelledrange of wines.

Richmond Grove andLawsons Vineyards

Padthaway, SA

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DescriptionRichmond Grove and LawsonsVineyards are located in Padthaway,South Australia, a cool climate regionwhich is famous for its premiumwines. The fruit produced at thesevineyards is of an extremely highstandard as a result of thecombination of careful varietalselection and management practices.The main varietals include Shiraz,Cabernet Sauvignon and Merlot.Grapes from this vineyard go intothe Trilogy and other Pernod RicardPacific premium wines.

Lease expiry profile (by income)

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Gnangara Vineyard

Manjimup, WA

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100

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DescriptionGnangara Vineyard is located in theManjimup region in Western Australia.This is a newly developed vineyardplanted to largely white varieties,namely Chardonnay and SauvignonBlanc.

Cocoparra andWoods Vineyards

Griffith, NSW

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Ownership interest 100% 100% 100%

Total area 496 ha 257.25 ha 21 haArea planted 266 ha 101.25 ha 9 haTenant Evans & Tate Evans & Tate Pooles Rock WinesOccupancy 100.0% 100.0% 100.0%Lease expiry date April 2013 April 2013 November 2014WALE 5.8 years 5.8 years 7.3 yearsReview type/s Increased on anniversary of Increased on anniversary of Increased on anniversary of

lease by CPI. lease by CPI. lease by CPI.FY07 net property income $1.03 million $0.66 million $0.79 millionDate acquired/established April 2003 April 2003 November 2004Purchase price $9.3 million $1.5 million $6.2 millionCarrying value $9.7 million $5.9 million $7.5 millionValuation $10.4 million $6.5 million $8.0 millionValuation date December 2006 December 2006 December 2006

DescriptionThe Cocoparra and Woods Vineyardsare located in Griffith in New SouthWales. These large, warm climatevineyards are planted to Semillon,Chardonnay, Shiraz, CabernetSauvignon, Merlot, Grenacheand Ruby Cabernet.

Pooles Rock Vineyardand Winery

Hunter Valley, NSW

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DescriptionPooles Rock Winery and Vineyard islocated in the Hunter Valley regionof New South Wales. The propertyincludes a small vineyard, a wineryand a restaurant that opened to thepublic in 2007. Grapes from thisvineyard go into Pooles Rock andCockfighters Ghost range of wines.

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Ownership interest 100% 100% 100%

Total area 41 ha 66.09 ha 197 haArea planted 24 ha 44.04 ha 167 haTenant Trillians Hill Vineyard Foster’s Group Delegat’s GroupOccupancy 100.0% 100.0% 100.0%Lease expiry date June 2017 May 2012 October 2012WALE 9.9 years 4.9 years 5.3 yearsReview type/s Increased on anniversary of Increased on anniversary of Minimum of CPI or 1.5% fixed

lease by CPI. lease by CPI. reviews annually.FY07 net property income $0.11 million $0.28 million $1.69 millionDate acquired/established June 2002 October 2002 September 2002Purchase price $0.9 million $3.2 million $15.0 millionCarrying value $1.1 million $3.2 million $23.2 millionValuation $1.1 million $28.0 million $23.3 millionValuation date April 2005 December 2006 December 2006

Sirens Vineyard

Margaret River, WA

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DescriptionSirens Vineyard is located in theMargaret River region of WesternAustralia. This cool climate regionis known for its Chardonnay andCabernet Sauvignon. Main varietalsinclude Chardonnay, Merlot, CabernetSauvignon and Sauvignon Blanc.Grapes from this vineyard go intothe Foster’s Group Fifth Leg rangeof wines.

Trillians Hill Vineyard

Clare, SA

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DescriptionTrillians Hill Vineyard is located in theClare Valley in South Australia, a coolclimate region which is famous for itspremium wines, particularly Rieslingand Shiraz. Grapes from this vineyardgo into the Killakanoon range ofpremium wines.

Dashwood Vineyard

Marlborough, New Zealand

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DescriptionDashwood Vineyard is located in theMarlborough region of New Zealand’sSouth Island, a region which is famousfor its premium wines, particularlySauvignon Blanc. The DashwoodVineyard development of SauvignonBlanc, Chardonnay and Pinot Noirgrape varieties began in Spring2002 and is now reaching maturity.Grapes from the vineyard go into theDelegat’s Group’s Oyster Bay rangeof wines.

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Rarangi Vineyard

Marlborough, New Zealand

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100

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0

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0%0% 0% 0% 0% 0%

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Ownership interest 100% 100% 100%

Total area 142 ha 45 ha 361 haArea planted 129 ha 40 ha 291 haTenant Delegat’s Group Delegat’s Group Delegat’s GroupOccupancy 100.0% 100.0% 100.0%Lease expiry date June 2014 April 2011 April 2011WALE 7.0 years 3.8 years 3.8 yearsReview type/s Minimum of CPI or Minimum of CPI or Minimum of CPI or

1.5% fixed reviews annually. 1.5% fixed reviews annually. 1.5% fixed reviews annually.FY07 net property income $1.29 million $0.60 million $2.2 millionDate acquired/established June 2004 April 2001 April 2001Purchase price $12.0 million $5.0 million $19.4 millionCarrying value $17.7 million $6.7 million $27.7 millionValuation $17.7 million $6.7 million $27.7 millionValuation date December 2006 June 2007 June 2007

DescriptionRarangi Vineyard is located in theMarlborough region of New Zealand’sSouth Island, a region which is famousfor its premium wines, particularlySauvignon Blanc. The RarangiVineyard is planted to Sauvignon Blancand Pinot Noir grape varieties. Thesevarieties are well suited to the site andreflect the varieties in demand fromthis region. Grapes from the vineyardgo into the Delegat’s Group’s OysterBay range of wines.

Gimblett Vineyards

Hawkes Bay, New Zealand

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DescriptionThe Gimblett Road Vineyards arelocated in the ‘Gimblett Gravels WineGrowing District’ in the Hawkes Bayregion of New Zealand’s North Island.The Gimblett Road Vineyards areplanted to Cabernet Sauvignon,Chardonnay and Merlot. The varietalsplanted are well suited to the site andconsistently produce premium qualityfruit. Grapes from the vineyard gointo the Delegat’s Group’s Oyster Bayrange of wines.

Crownthorpe Vineyard

Hawkes Bay, New Zealand

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DescriptionThe Crownthorpe Vineyard is locatedin the Hawkes Bay region of NewZealand’s North Island. Planting ofthe Crownthorpe Vineyard startedin 2001, and today comprises thelargest single vineyard planting inthe Hawke’s Bay wine region.Grapes from the vineyard go intothe Delegat’s Group’s Oyster Bayrange of wines.

Lease expiry profile (by income)

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Barossa Valley, SA

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100%

Ownership interest 100%

Total area 205 haArea planted 117.5 haTenant Grant Burge WinesOccupancy 100.0%Lease expiry date August 2015WALE 8.0 yearsReview type/s Rent increased annually but shall

not be greater than 1.5% of theformer rent.

FY07 net property income n/aDate acquired/established August 2007Purchase price $11.5 millionCarrying value $12.4 millionValuation $11.5 millionValuation date June 2007

DescriptionMiamba Vineyards is an aggregationof five neighbouring propertieslocated in the Barossa Valley inSouth Australia. All grapes fromthese properties go into GrantBurge brands including BarossaVines, Miamba, Filsell, Chaff Mill,Cameron Vale and Meshach brands.

Lease expiry profile (by income)

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IntroductionThe Australian Securities Exchange (ASX)

Corporate Governance Council has developed

a set of guidelines entitled Principles of

Corporate Governance and Best Practice

Recommendations (ASX principles).

The ASX principles are non-prescriptive,

however, listed entities (including CWT) are

required in their annual report to disclose

the extent of their compliance with the ASX

principles and to explain why they have not

adopted any particular recommendation.

Most of the recommendations contained in

the ASX principles are relevant to CWT and

have been adopted. However, several are

either not relevant or the Responsible Entity

has decided that it is appropriate not to

implement them.

Other than where specifically stated to the

contrary, the Responsible Entity’s corporate

governance structure as described below

complies with the ASX principles.

Where it is indicated, a policy is available on

CWT’s website. For further information on

corporate governance policies adopted by

the Responsible Entity, refer to our website

www.challenger.com.au/cwt.

CWTRole of the Responsible EntityThe role of the Responsible Entity is to

manage CWT in the unitholders’ best interests

in accordance with CWT’s constitution and

the Corporations Act 2001 (Act). The Act

empowers the Responsible Entity to engage

agents on its behalf, however, it remains fully

responsible for the actions of those agents.

The Responsible Entity has appointed

Challenger Management Services Limited

to manage CWT. Challenger Management

Services Limited and the Responsible Entity

are wholly owned subsidiaries of Challenger

Life Holdings Limited which is wholly owned

by Challenger Financial Services Group

Limited (CFSG).

CWT’s constitution governs, among other

things, how CWT will operate, how the

Responsible Entity’s remuneration will be

calculated and the rights of unitholders.

The Responsible Entity must also prepare

and lodge a compliance plan with the

Australian Securities and Investments

Commission (ASIC). The compliance plan

sets out the mechanisms the Responsible

Entity has in place to ensure compliance

with CWT’s constitution and the Act.

Board structureRelationship with ChallengerFinancial Services GroupThe corporate governance structure adopted

by the Responsible Entity reflects its role as

the responsible entity of a listed property

trust. In several ways, this will be different

to the corporate governance structure of a

listed company.

CFSG has expertise in developing and

managing specialist investment funds in areas

of property and infrastructure. The Responsible

Entity makes extensive use of the resources

available within CFSG in managing CWT.

The resources provided to assist the

Responsible Entity in fulfilling its role

include the services of senior executives

and responsible officers. CFSG in consultation

with the Responsible Entity may also appoint

appropriately skilled independent directors and

executives to ensure that CWT continues to be

managed to maximise returns to unitholders

within CWT’s stated strategy and mandate.

Composition of the BoardSee pages 30-31 for profiles of the directors,

including details of their skills, experience

and expertise.

Nomination and appointmentof directorsThe Responsible Entity is a wholly owned

subsidiary of CFSG. As a result, the Board

has not appointed a formal nominations

committee. The Board will draw upon

the CFSG nominations committee

recommendations for new directors. Such

recommendations are referred to the Board

of the Responsible Entity for approval prior to

any appointment. This represents a departure

from the ASX principles (recommendation 2.4)

which requires a nominations committee.

In determining the appointment of new

directors, the Board must comprise:

Corporategovernancestatement

2007

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skills, experience and expertise; and

• directors who can understand and

competently deal with current and

emerging statutory developments.

Independent directorsThe Board has adopted an Independence

Policy. This policy meets the ASX principles

with the exception of the substantial

unitholder test. The Board has considered

this departure from the ASX principles.

The directors believe the Independence

Policy explains why it is appropriate for the

Responsible Entity. The policy states that an

independent director is a director who is

not a related party of, or associated directly

with, a substantial unitholder of CWT, except

where the person is a director of a related

party with a substantial unitholding in CWT

and the directors have resolved that the

director is independent of management

and free of any business relationship that

could materially interfere with, or could

reasonably be perceived to materially

interfere with, the exercise of their

unfettered and independent judgement.

Based on this policy, there is a majority of

independent directors on the Board.

Board CharterThe Board has adopted a formal Board

Charter which details the functions and

responsibilities of the Board with respect

to its oversight and management of CWT.

The topics covered in the Board Charter are:

• board size and composition;

• board’s role and responsibilities;

• audit and compliance committee;

• directors;

• conflicts;

• access to information and independent

advice by directors;

• ethical standards; and

• role of approved auditor.

The Board has delegated to CWT’s Fund

Manager the authority and powers necessary

to implement the strategies approved by the

Board for CWT and to manage the business

affairs of CWT within the policies and specific

delegation limits specified by the Board from

time to time.

A summary of the Board Charter is available

on CWT’s website.

Independent professional adviceAll directors have unrestricted access to the

Responsible Entity’s and CWT’s records and

information. The Company Secretary provides

directors with guidance on corporate

governance matters and developments and on

all other matters reasonably requested by the

directors. The Board or each individual director

has the right to seek independent professional

advice at the Responsible Entity’s expense to

assist them in discharging their duties.

Code of ConductThe Responsible Entity is committed to

maximising returns to unitholders whilst also

promoting unitholder and general market

confidence in CWT. As a wholly owned

subsidiary of CFSG, the Responsible Entity,

its directors and executives are subject to

the Code of Conduct of CFSG. The Code

of Conduct, as it applies to CWT, is designed

to ensure:

• high standards of corporate and individual

behaviour are observed by all directors and

executives in the context of their roles; and

• staff are aware of their responsibilities to

CWT and always act in an ethical and

professional manner.

The Code of Conduct requires directors and

executives to report any actual or potential

breach of the Act, the Code of Conduct

or other policies. The Responsible Entity

promotes and encourages ethical behaviour

and provides protection for those who report

violations.

A summary of the Code of Conduct is

available on CWT’s website.

Review of Board and seniormanagement performanceAn induction program has been implemented

to assist new independent directors. Existing

directors are encouraged to pursue continuing

education to update and improve their skills

and knowledge.

The CFSG executives on the Board, the

Chief Executive and other CFSG executives

performing services for CWT are subject to

annual performance evaluation.

This is part of CFSG’s employee evaluation

process. For independent directors, a

formal methodology for review is currently

being considered.

Audit and Compliance CommitteeThe Board has established an Audit and

Compliance Committee (‘Committee’) which

is responsible for advising the Board on

internal controls and appropriate standards

for the management of CWT. The Committee

oversees the financial reporting process,

the system of internal control and risk

management, the audit process and the

Responsible Entity’s processes for monitoring

compliance with laws and regulations.

The Committee also assists the Board in

discharging its responsibilities under the

Compliance Plan adopted by the Responsible

Entity. The Committee works on behalf of the

Board with the external auditor and reviews

non-audit services provided by the external

auditor to confirm that they are consistent

with maintaining external audit

independence.

The Committee is comprised of a majority

of independent members. The Committee is

currently comprised as follows:

• Ian Martens – chairman – independent

director

• Ian Moore – independent director

• Russell Hooper – independent director.

The Committee has adopted a Charter

which outlines the duties and responsibilities

of the Committee, which include:

• reviewing the financial statements of

CWT for the half year and full year and

considering whether they are complete

and consistent with information known

to the Committee members;

• monitoring the extent to which the

Responsible Entity complies with CWT’s

Compliance Plan, the Act and CWT’s

constitution and reviewing the

effectiveness of the system for monitoring

compliance with laws and regulations;

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• considering the overall risk management

framework for CWT and reviewing its

effectiveness in meeting sound corporate

governance principles and identifying,

managing and monitoring the key risks

to CWT; and

• meeting separately from management

with the external auditor at least once a

year to discuss any matters the Committee

and the auditor believe should be

discussed privately.

To assist the Board and the Committee in

discharging their respective responsibilities,

the Fund Manager and Chief Financial Officer

of CWT are required to provide the Board and

Committee with a letter of representation in

relation to the financial statements of CWT.

The letter of representation confirms that

CWT’s financial reports present a true and

fair view, in all material respects, of CWT’s

financial condition and operational results

and are in accordance with relevant

accounting standards. The letter describes

the process the Fund Manager and Chief

Financial Officer have adopted to satisfy

themselves on these matters.

A summary of the Charter is available on

CWT’s website.

CWT Investment CommitteeThe Board has established a CWT Investment

Committee (CWT IC) which is responsible

for assisting the Board on property related

activities.

The CWT IC consists of at least three

members. The current CWT IC membership

consists of two independent directors, one

of whom will act as chairperson, and three

senior executives of the Challenger Group.

The CWT IC has adopted a Charter which

outlines the duties of the CWT IC, which

include:

• review and approval of CWT investments;

• monitoring and reporting of market,

liquidity and credit risk exposures; and

• monitoring of investment policies and

limits and reporting breaches of the

policies and limits to the Board.

On 14 August 2007, the Board resolved

to replace the CWT IC with the Property

Investment Committee (PIC). The PIC is

responsible for assisting the Board on property

related investments. The PIC consists of at

least three members. The current PIC

membership consists of two independent

directors, one of whom will act as

chairperson, and three senior executives

of the Challenger Group.

Risk managementThe Responsible Entity believes that the

management of risks is fundamental to

CWT’s operations and to building unitholder

value. The Board is responsible for CWT’s

risk management strategy and management

is responsible for implementing the Board’s

strategy and for developing policies and

procedures to identify, manage and

mitigate risks across CWT’s operations.

The Board has adopted the CFSG Operational

Risk Framework and formal policies in

respect of compliance and operational risk

management. Risks at both the Responsible

Entity and CWT level are managed through

the CFSG Operational Risk framework

and include:

• regulatory and reporting risks;

• financial risks (such as liquidity, interest

rate, currency and investment);

• legal risks (such as contract enforceability,

covenants);

• operational risks (such as people,

processes, infrastructure, technology); and

• reputation risk (such as investor relations,

media management).

The Responsible Entity as a subsidiary

of CFSG is subject to periodic review

by the CFSG internal audit function.

At the time of approving the financial

statements of CWT, the Board requires

representation letters from management

(see above) to address risk management

and internal compliance and controls

relevant to risk.

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A summary of the attendance of the directors at the CLIL Board meetings and committees held in the period 1 July 2006 to 30 June 2007 are as follows:

Board Audit and CWTCompliance InvestmentCommittee Committee

Eligible Eligible EligibleDirector Notes to attend Attended to attend Attended to attend Attended

S Gerlach 13 9 – – 5 4

P Brook 1 10 10 – – – –

R Hooper 13 12 9 9 – –

I Martens 13 13 9 9 5 5

G Martin 2 1 – – – – _

G McWilliam 13 13 – – – –

I Moore 13 13 9 8 – –

P Polson 3 1 1 – – – –

P Rogan 4 3 3 2 2 – –

R Woods 13 13 – – – –

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2007Disclosure of remunerationThe Responsible Entity is entitled to be paid

base and performance fees under the terms

of the Constitution for managing CWT. All

executives involved in the management of

CWT are employees of CFSG and are not

remunerated by CWT.

As CWT does not pay any remuneration

directly to executives of the Responsible

Entity, the Responsible Entity considers that

the requirement to disclose its remuneration

policies (pursuant to recommendation 9.1

of the ASX principles), to establish a

remuneration committee (pursuant to

recommendation 9.2) and to distinguish

the nature of executive remuneration from

that of non-executives (pursuant to

recommendation 9.3) are not relevant to

CWT. In addition, CWT does not have an

equity based executive remuneration trust

in operation and thus the disclosure required

by recommendation 9.4 is also not relevant

to CWT. These represent departures from

the ASX principles.

See pages 71-72 for details on the calculation

of Responsible Entity fees.

Independent directors’ feesIndependent directors are paid an annual

fee for their service on the Board and all

committees of the Board. Independent

directors are not provided with retirement

benefits other than statutory superannuation

and do not receive options or bonus

payments.

All independent director remuneration is

paid by the Responsible Entity and is not

an expense of CWT.

Staff Trading PolicyThe Board has adopted the CFSG Staff

Trading Policy. Directors and staff are subject

to restrictions under the Corporations Act

relating to dealing in securities, including the

units issued by CWT if they are in possession

of inside information. The policy applies to

all directors and staff and places restrictions

and reporting requirements on staff, including

limiting trading in units in CWT and CFSG

shares to specific trading windows and in a

specified manner and requiring those staff

designated as potentially having access to

inside information to seek prior approval

to trades in other securities.

A summary of the Staff Trading Policy is

available on CWT’s website.

Communications with unitholdersConsistent with CWT’s Continuous Disclosure

Policy, the Responsible Entity is committed

to communicating with unitholders in an

effective and timely manner so as to provide

them with ready access to information

relating to CWT.

CWT lodges with the ASX market sensitive

information including annual and half year

profit announcements, financial reports

and analysts’ presentations as soon as they

are available.

The Responsible Entity has a practice of

ensuring that all information to be given

by the Responsible Entity in relation to

CWT at analyst and investor briefings is

first released to the ASX to ensure that the

market is fully informed.

The Responsible Entity is not required to hold

annual general meetings for CWT, however, it

may convene general meetings from time to

time. Where the Responsible Entity convenes

a general meeting for CWT, unitholders are

strongly encouraged to attend and participate

in such meetings. The Responsible Entity

will provide unitholders with details of any

proposed meeting well in advance of the

relevant date.

If unitholders cannot attend formal meetings,

they may lodge a proxy in accordance with

the Corporations Act. Proxy forms can be

mailed or lodged by facsimile.

The external auditor will attend unitholder

meetings and be available to answer

unitholder questions.

Notes1. P Brook was appointed to the Board on 6 November 2006.2. G Martin resigned from the Board on 4 August 2006.3. P Polson resigned from the Board on 4 August 2006.4. P Rogan resigned from the Board on 2 November 2006.

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financial report

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The directors of ChallengerListed Investments Limited(CLIL) (ABN 94 055 293 644),the Responsible Entity of theChallenger Wine Trust (CWT)(ARSN 092 960 060), submit theirreport together with the financialreport for CWT, for the year ended30 June 2007.

Principal activitiesThe principal activity of Challenger Wine

Trust during the period was to pool

investors’ funds in a portfolio of vineyards

and wine infrastructure assets which is

designed to provide its investors with a

stable distribution stream derived from

net rental incomes. The Trust’s investments

are structured in such a way as to avoid

the risks inherent in grape production.

Scheme informationChallenger Listed Investments Limited

(CLIL), the Responsible Entity of the Trust,

is incorporated and domiciled in Australia.

The registered office of the Responsible

Entity is located at Level 15, 255 Pitt Street,

Sydney NSW 2000.

Directors’report

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Directors’ summaryThe following persons held office as directors

of CLIL during the period 1 July 2006 to

30 June 2007:

• Stephen Gerlach Chairman

• Peter Brook (appointed 6 November 2006)

• Russell Hooper

• Ian Martens

• Greg Martin (resigned 4 August 2006)

• Geoff McWilliam

• Ian Moore

• Peter Polson (resigned 4 August 2006)

• Paul Rogan (resigned 2 November 2006)

• Robert Woods

Qualifications, experienceand special responsibilitiesof directorsCLIL has considerable expertise in

the infrastructure, property and funds

management sectors as illustrated by

the experience of its directors.

The names and details of the directors in

office at the date of this report are as follows.

Directors andKey Management Personnel

Stephen GerlachLLB, FAICDChairman

Mr Gerlach has extensive experience as a

corporate adviser and company director,

having held positions on the boards of several

public companies. At present he is on the

Board of Santos Limited (Chairman) and

Futuris Corporation Limited (Chairman).

Mr Gerlach is the former Managing Partner

of Adelaide legal firm Finlaysons, and is a

former Director of Elders Australia Limited

(Chairman), Elders Rural Bank Limited,

Equatorial Mining Limited (Chairman),

Penrice Soda Products Limited (Chairman),

Southcorp Limited and Brunner Mond

Holdings Limited (UK).

Mr Gerlach is a member of the Australian

Institute of Company Directors, its Corporate

Governance Committee and is Chairman of

Foodbank SA Inc, a Director of Foodbank

Australia Inc and a Trustee of the Australian

Cancer Research Foundation.

Mr Gerlach is a member of the CLIL

Challenger Wine Trust Investment Committee.

Peter BrookBComm, MMngt, AICAExecutive Director

Mr Brook is the Chief Financial Officer of

Challenger’s Asset Management division.

In this role, Mr Brook is responsible for

overseeing the financial management and

reporting of the Asset Management division’s

investment portfolio and specialist funds

across direct property, infrastructure and

fixed income.

Mr Brook has over 20 years experience in

finance roles, most recently with MLC Limited

and National Australia Bank, prior to which

he was a partner in professional practice.

Russell HooperFAICD, FCPA, FFinNon-Executive Director

Mr Hooper has extensive experience in

financial services, including over 13 years

at St.George Bank Limited and Advance

Bank Limited, where he held senior

management positions in life insurance,

wealth management and listed investment

trusts, including the role of Chief General

Manager, Funds Management.

Mr Hooper is also a Director of Challenger

Financial Services Group Limited, Challenger

Life No.2 Limited and Century Australia

Investments Limited, and was previously

a Director of (and Chairman of the Audit

Committee for) Commonwealth Insurance

Limited, a subsidiary of the Commonwealth

Bank. Mr Hooper is a Fellow of the

Australian Institute of Company Directors,

the Australian Society of Certified Practising

Accountants and the Financial Services

Institute of Australasia.

Mr Hooper is a member of the CLIL Audit

and Compliance Committee.

Ian MartensFCA, FAICDNon-Executive Director

Mr Martens is a chartered accountant

and was senior partner at BDO Chartered

Accountants (SA), where he is now a

consultant. Throughout his career Mr Martens

has advised a broad range of public and

private companies on financial measurement

and reporting, strategy development and

evaluation and merger and acquisitions

activities.

Mr Martens is currently Chairman of

RAA Insurance Ltd and a Director of

RAA Investments Pty Ltd and the Royal

Automobile Association of SA Inc.

Mr Martens is Chairman of the CLIL Audit

and Compliance Committee and the CLIL

Challenger Wine Trust Investment Committee.

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Mr McWilliam has had an extensive career in

the Australian property investment industry.

Most recently, Mr McWilliam spent 10 years

building the Commonwealth Bank’s property

funds management division, Colonial First

State Property. As head of this business, he

was responsible for the management and

performance of over $16 billion in listed

and unlisted property funds. Prior to this,

Mr McWilliam spent 23 years with Lend

Lease Corporation in a variety of senior

management roles.

Mr McWilliam is a Director of Lend Lease

Funds Management Limited, Lend Lease

Asian Retail Investments Limited, Lend Lease

Real Estate Investments Limited, St Laurence

Limited (NZ), Dunmore Lang College Limited,

Gandel Group Pty Ltd and the Dusseldorp

Skills Forum Incorporated, and a Fellow of

the Australian Property Institute.

Ian MooreBA, FIA, FIAANon-Executive Director

Mr Moore has extensive experience in

investment banking and structured finance.

Mr Moore was Head of Corporate Finance

at Bankers Trust Investment Bank where he

was responsible for all forms of corporate,

project and asset backed financings.

Mr Moore is currently a Director of Artesian

Capital Management and a Fellow of the

Institute of Actuaries of Australia and the

Institute of Actuaries in London.

Mr Moore is a member of the CLIL Audit

and Compliance Committee.

Robert WoodsBCommExecutive Director

Mr Woods is Chief Executive, Asset

Management at Challenger. In this role,

Mr Woods is responsible for managing

Challenger’s $6.6 billion portfolio of

investments in direct property, infrastructure

and fixed income. The Asset Management

business manages assets for third party

investors, policyholders and shareholders,

generating spread and fee based income.

Prior to joining Challenger, Mr Woods was

a founder of Zurich Capital Markets Asia,

where he was responsible for the alternative

asset business. Prior to this, Mr Woods spent

11 years with Bankers Trust in investment

banking.

Bevan TowningHead of Specialised Funds

Mr Towning joined Challenger in February

2006 and is Head of Specialised Funds for

Challenger. In this role, Mr Towning is

responsible for the management and

performance of Challenger’s listed and

unlisted funds as well as attracting third

party capital for co-investment.

Prior to joining Challenger, Mr Towning

spent five years as the General Manager,

Listed Funds for Colonial First State’s

property division. In this role Mr Towning

was responsible for the strategic direction,

management and performance of two ASX

100 listed property trusts with combined

gross assets in excess of $7.5 billion, namely

CFS Gandel Retail Trust (of which he was also

Fund Manager) and Commonwealth Property

Office Fund.

Mr Towning has 25 years experience in the

property investment industry, including roles

in funds management, asset management,

property leasing and valuation with Colonial

First State, Lend Lease, Armstrong Jones and

Richard Ellis International.

Nick GillFund ManagerChallenger Wine Trust (CWT)

Mr Gill joined Challenger in November 2006

in the role of Fund Manager. Mr Gill has

specific responsibility for the ongoing

management of CWT. This includes

responsibility for Trust strategy, financial and

investment performance and transaction

evaluation and execution.

Mr Gill has over 20 years experience in the

corporate agribusiness and investment

industries, including roles in corporate

strategy, commercial management and

investment with Macquarie Bank, SunRice

Limited, Twynam Agricultural Group, Colly

Cotton Limited and Rural Property Trust.

Company Secretary

Chris RobsonBA, LLB (Hons), LLMGeneral Counsel andGroup Company Secretary

Mr Robson is a qualified solicitor and is the

Group Company Secretary and General

Counsel of the Challenger Financial Services

Group. He is also a non-independent Director

of certain subsidiaries of the Challenger

Group. His responsibilities include leading the

legal and company secretariat teams within

the Business Services division of the

Challenger Group.

Suzie KoeppenkastropBComm, LLB, LLMCompany Secretary

Ms Koeppenkastrop is a qualified solicitor

and head of the company secretariat team

at Challenger. Ms Koeppenkastrop has over

13 years experience in legal and company

secretarial roles in the financial services

industry.

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Corporate governanceIn recognising the need for the highest standards of corporate behaviour and accountability, the directors of CLIL support and have adhered to

the ASX Corporate Governance Council’s Principles of Corporate Governance and Best Practice Recommendations. The corporate governance

statement is contained in the corporate governance section of this report.

Review and results of operationsThe consolidated net profit before tax for the year to 30 June 2007 attributable to unitholders of CWT was $7,875,356 (2006 Restated:

$13,779,904). The following table provides an analysis of the result:

Consolidated Consolidated

Restated30 June 2007 30 June 2006

$’000 $’000

Net property income 28,925 28,144

Profit from operating activities 14,331 13,171

Net fair value movement in non-current assets (i) (6,456) 608

Net profit attributable to unitholders 7,875 13,779

Distributions to ordinary unitholders 14,326 13,175

Interim distributions – paid 15 November 2006, 15 February 2007 and15 May 2007 (cents per unit) 6.815 6.746

Final distribution – to be paid on 16 August 2007in respect of 30 June 2007 (cents per unit) 2.285 2.316

(i) Following discussions and agreement with ASIC, CWT has restated its prior period comparatives to take into account a change in the treatmentof vines, investment properties, integral infrastructure and water rights. The impact of the change has resulted in a decrease in carrying value ofwater rights due to recognising intangible assets at cost (water rights previously carried at fair value within vines). The net fair value movementin non-current assets consists of:

Consolidated Consolidated

Restated30 June 2007 30 June 2006

$’000 $’000

Net fair value movement in non-current assets for the year consists of:

(Decrease)/increase from revaluation of non-current assets (4,552) 2,951

(Decrease) in carrying value due to recognising intangible assets at cost (1,904) (2,343)

(6,456) 608

DistributionsInterim distributions of 6.815 cents per unit were paid as described above. On 14 August 2007, the directors resolved to pay a final distribution

of 2.285 cents per unit on 16 August 2007 in respect of the period ended 30 June 2007 resulting in a total distribution of 9.100 cents per unit

for the year.

Units on issue170,312,633 (2006: 151,957,010) ordinary units were on issue at 30 June 2007. During the period, 1,151,178 ordinary units and 2,016 Preferred

Indexed Convertible Equity (PICE) units were issued through the respective Distribution Reinvestment Plans. The Distribution Reinvestment Plans for

ordinary and PICE unitholders were suspended on 15 August 2006.

On 27 April 2007, all 1,494,938 PICE units on issue were converted, in accordance with the PICE unit terms of issue, into 17,204,445 ordinary

units.

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2007Earnings per unitBasic earnings per unit amounts are calculated by dividing the net profit after tax attributable to ordinary unitholders by the weighted average

number of securities outstanding during the period.

All PICE units were converted to ordinary units during the year therefore no diluted earnings per unit calculations are provided for the year

ended 30 June 2007.

The following reflects the income and security data used in the basic earnings per unit computations.

Consolidated Consolidated

Restated30 June 2007 30 June 2006

Net profit attributable to unitholders ($’000) 7,875 13,779

Time weighted average number of units for basic earnings per unit at year end(Number of units in thousands) 156,172 145,358

Time weighted average number of units for diluted earnings per unit at year end(Number of units in thousands) 156,172 169,043

Basic earnings per unit for net profit attributable to unitholders (cents per unit) 5.04 9.48

Diluted earnings per unit for net profit attributable to unitholders (cents per unit) 5.04 9.18

Scheme assetsAt 30 June 2007, CWT held assets to a total value of $297.5 million (2006 Restated: $294.0 million). The basis for valuation of the assets is

disclosed in Note 2 to the financial statements.

Fees paid to the Responsible Entity and associatesThe following table discloses all fees paid by CWT to CLIL and Challenger Management Services Limited (CMSL) under the Trust Constitution

and to CMSL under the management agreement with CLIL:

Consolidated Consolidated

Restated30 June 2007 30 June 2006

$’000 $’000

(a) Responsible Entity fees for the financial year paid to CLIL in accordancewith the Scheme Constitution 300 1,524

(b) Management fees for the financial year paid to CMSL under theManagement Agreement 2,045 1,057

Total fees paid or payable at balance date 2,345 2,582

Of the above fees $71,216 (2006: $161,197) has been capitalised to property acquisitions and developments.

Interests held in CWT by the Responsible Entity and its associatesThe following related entities of CLIL hold interests of 5% or more in CWT:

• Challenger Life No.2 Limited holds 44,626,652 ordinary units (26%) (2006: 36,251,019 ordinary units and 783,052 PICE units) as at

30 June 2007.

Challenger Life No.2 Limited (CL2) and CLIL are wholly owned subsidiaries of Challenger Financial Services Group Limited.

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Significant changes in the state of affairsThere were no significant changes to the state of affairs of CWT during the year, other than those changes identified in the financial statements

for the year ended 30 June 2007.

Significant events after the balance dateExcept for those items disclosed in Note 28 to the financial statements there has been no matter or circumstance that has arisen since the

end of the financial year that has significantly affected, or may affect, CWT’s operations in future financial years, the results of those operations

or CWT’s state of affairs in future financial years.

Likely developments and expected resultsFurther information on likely developments on the operation of CWT and the expected results of those operations have not been included

in this report because the Responsible Entity believes it would be likely to result in unreasonable prejudice to CWT.

Environmental regulation and performanceThe Trust owns properties which are subject to environmental regulations under both Commonwealth and State legislation. The directors are

satisfied that adequate systems were in place for the management of the environmental responsibilities and the compliance with various

legislative, regulatory and licence requirements. Further, the directors are not aware of any breaches to these requirements and to the best

of their knowledge all activities have been undertaken in compliance with environmental requirements.

Indemnification and insurance of directors and officersThe Responsible Entity (RE) has insured the directors and officers against liabilities incurred in their role as directors and officers of the RE.

The RE is prohibited by the insurance contract itself from disclosing the nature of the liabilities covered and the amount of the premium.

The auditors of CWT are in no way indemnified out of the assets of the scheme.

Fund Manager and CFO declarationThe Fund Manager and Chief Financial Officer have given a declaration to the Board of directors that in their opinion the financial records

of CWT have been properly maintained in accordance with section 286 of the Corporations Act 2001, and the financial statements and notes

for the financial year ended 30 June 2007 comply with accounting standards and give a true and fair view.

Rounding of amounts in the directors’ report and the financial reportCWT is a registered scheme that is of a kind referred to in Class Order 98/100, issued by ASIC, relating to the ‘rounding off’ of amounts in the

directors’ report and financial report. Amounts in the directors’ report and financial report have been rounded off to the nearest thousand dollars in

accordance with that Class Order, unless otherwise indicated.

Auditor’s Independence DeclarationWe have obtained an independence declaration from our auditor, Ernst & Young, as set out on page 35.

This report is made in accordance with a resolution of directors of Challenger Listed Investments Limited.

Russell Hooper

Director

Sydney

22 August 2007

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Auditor’s Independence Declaration to the Directors of the Responsible Entity

of the Challenger Wine Trust

In relation to our audit of the financial report of Challenger Wine Trust for the financial year ended

30 June 2007, to the best of my knowledge and belief, there have been no contraventions of the

auditor independence requirements of the Corporations Act 2001 or any applicable code of

professional conduct.

Ernst & Young

Graeme McKenzie

Partner

22 August 2007

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Auditor’s Independence Declaration

Liability limited by a scheme approved underProfessional Standards Legislation.

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Income StatementFor the year ended 30 June 2007

Consolidated Consolidated Parent Parent

Restated Restated30 June 2007 30 June 2006 30 June 2007 30 June 2006

Notes $’000 $’000 $’000 $’000

Property income

Rental income 28,925 28,144 10,157 10,589

Less: Property related expenses – – – –

Net property income 28,925 28,144 10,157 10,589

Other income 4 505 334 10,467 9,556

Net gains from sale of investment property – 47 – 47

Other trust expenses

Finance costs 5 (11,627) (11,904) (4,569) (5,186)

Responsible Entity’s and Manager’s fees (2,274) (2,420) (733) (840)

Operating expenses 5 (1,198) (1,030) (991) (995)

Profit from operating activities 14,331 13,171 14,331 13,171

Unrealised foreign exchange losses – – 1,516 (1,240)

Net fair value movement in non-current assets 17 (6,456) 608 (1,139) (3,291)

Net profit 7,875 13,779 14,708 8,640

Basic earnings per ordinary unit (cents) 5.04 9.48 9.42 5.94

Diluted earnings per ordinary unit (cents) 5.04 9.18 9.42 6.14

Distributions paid per ordinary unit (cents) 9.10 9.06 9.10 9.06

The above Income Statement should be read in conjunction with the notes to the financial statements set on pages 42 to 74.

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Distribution StatementFor the year ended 30 June 2007

Consolidated Consolidated

Restated30 June 2007 30 June 2006

Note $’000 $’000

Net profit attributable to unitholders of CWT 7,875 13,779

Earnings per unit (cents) 5.04 9.48

Adjusted for:

Net fair value movement in non-current assets 6,456 (608)

Transfers to/(from) retained earnings (5) 4

Distribution to unitholders 6 14,326 13,175

Distribution per unit (cents) 9.10 9.06

The above Distribution Statement should be read in conjunction with the notes to the financial statements set on pages 42 to 74.

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Balance SheetAs at 30 June 2007

Consolidated Consolidated Parent Parent

Restated Restated30 June 2007 30 June 2006 30 June 2007 30 June 2006

Notes $’000 $’000 $’000 $’000

Assets

Current assets

Cash and cash equivalents 8 6,158 3,991 1,367 2,983

Trade and other receivables 9 1,030 374 1,307 10,238

Prepayments 10 122 887 77 867

Other financial assets 11 – 600 – 600

Assets of a disposal groupclassified as held for sale 18 8,691 – 8,691 –

Total current assets 16,001 5,852 11,442 14,688

Non-current assets

Investment properties 13 161,358 160,674 42,042 45,617

Vines 14 94,991 103,727 26,222 34,874

Intangible assets 15 16,995 15,827 5,111 3,943

Plant and equipment 16 4,954 7,024 4,954 7,024

Derivative financial instruments 24 2,293 – 566 –

Available-for-sale financial assets 12 500 500 76,441 60,039

Other financial assets 11 397 397 21,090 21,090

Total non-current assets 281,488 288,149 176,426 172,587

Total assets 297,489 294,001 187,868 187,275

Liabilities

Current liabilities

Trade and other payables 19 2,034 1,931 987 942

Rent received in advance 976 819 274 121

Distributions payable 6 3,892 3,519 3,892 3,519

Interest-bearing liabilities 20 – 1,925 – 1,925

Derivative financial instruments 24 – 1,760 – 633

Liabilities directly associated withthe assets classified as held for sale 18 2,366 – 2,366 –

Total current liabilities 9,268 9,954 7,519 7,140

Non-current liabilities

Interest-bearing liabilities 20 132,027 127,210 39,654 41,834

PICE units 21 – 13,625 – 13,625

Total non-current liabilities 132,027 140,835 39,654 55,459

Total liabilities 141,295 150,789 47,173 62,599

Net assets 156,194 143,212 140,695 124,676

Equity

Contributed equity 22 145,644 131,206 145,644 131,206

Retained earnings 23 6,835 13,286 (5,968) (6,350)

Reserves 23 3,715 (1,280) 1,019 (180)

Total equity 156,194 143,212 140,695 124,676

The above Balance Sheet should be read in conjunction with the notes to the financial statements set on pages 42 to 74.

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Statement of Changes in EquityFor the year ended 30 June 2007

Issued Retainedcapital earnings Reserves Total

$’000 $’000 $’000 $’000

Consolidated

Balance as at 1 July 2005 134,280 12,682 1,997 148,959

Adjustment on transition to AIFRS – – (2,666) (2,666)

Currency translation differences – – (1,517) (1,517)

Fair value movements in derivativefinancial instruments – – 906 906

Total income and expense for the yearrecognised directly in equity – – (3,277) (3,277)

Restated profit for the year – 13,779 – 13,779

Total income and expense for the year – 13,779 – 13,779

Transfer PICE units to liabilities ontransition to AIFRS (16,434) – – (16,434)

Issues of units 13,448 – – 13,448

Capital raising costs (88) – – (88)

Distribution to unitholders – (13,175) – (13,175)

Balance as at 30 June 2006 131,206 13,286 (1,280) 143,212

Balance as at 1 July 2006 131,206 13,286 (1,280) 143,212

Currency translation differences – – 942 942

Fair value movements in derivativefinancial instruments – – 4,053 4,053

Total income and expense for theyear recognised directly in equity – – 4,995 4,995

Profit for the year – 7,875 – 7,875

Total income and expense for the year – 7,875 – 7,875

Conversion of PICE units to equity 13,643 – – 13,643

Issues of units 806 – – 806

Capital raising costs (11) – – (11)

Distribution to unitholders – (14,326) – (14,326)

Balance as at 30 June 2007 145,644 6,835 3,715 156,194

The above Statement of Changes in Equity should be read in conjunction with the notes to the financial statements set on pages 42 to 74.

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Statement of Changes in Equity (continued)For the year ended 30 June 2007

Issued Retainedcapital earnings Reserves Total

$’000 $’000 $’000 $’000

Parent

Balance as at 1 July 2005 134,280 (1,815) 453 132,918

Adjustment on transition to AIFRS – – (1,858) (1,858)

Fair value movements in derivativefinancial instruments – – 1,225 1,225

Total income and expense for theyear recognised directly in equity – – (633) (633)

Restated profit for the year – 8,640 – 8,640

Total income and expense for the year – 8,640 – 8,640

Transfer PICE units to liabilitieson transition to AIFRS (16,434) – – (16,434)

Issues of units 13,448 – – 13,448

Capital raising costs (88) – – (88)

Distribution to unitholders – (13,175) – (13,175)

Balance as at 30 June 2006 131,206 (6,350) (180) 124,676

Balance as at 1 July 2006 131,206 (6,350) (180) 124,676

Fair value movements in derivativefinancial instruments – – 1,199 1,199

Total income and expense for theyear recognised directly in equity – – 1,199 1,199

Profit for the year – 14,708 – 14,708

Total income and expense for the year – 14,708 – 14,708

Conversion of PICE units to equity 13,643 – – 13,643

Issues of units 806 – – 806

Capital raising costs (11) – – (11)

Distribution to unitholders – (14,326) – (14,326)

Balance as at 30 June 2007 145,644 (5,968) 1,019 140,695

The above Statement of Changes in Equity should be read in conjunction with the notes to the financial statements set on pages 42 to 74.

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The above Cash Flow Statement should be read in conjunction with the notes to the financial statements set on pages 42 to 74.

Consolidated Consolidated Parent Parent

Restated Restated30 June 2007 30 June 2006 30 June 2007 30 June 2006

Notes $’000 $’000 $’000 $’000

Cash flows from operating activities

Rental received 28,734 25,963 10,455 11,198

Interest received 447 360 231 1,574

Dividends received 101 27 101 27

Finance costs paid (10,322) (9,715) (3,470) (2,771)

Payments to suppliers (3,253) (3,677) (1,323) (1,545)

Distributions received – – 10,169 3,146

Net cash flows fromoperating activities 8 15,707 12,958 16,163 11,629

Cash flows from investing activities

Proceeds from disposal of property 5,970 2,701 5,970 2,701

Payment for vines, investmentproperties and developments (4,920) (21,241) (2,834) (5,070)

Proceeds from deposits 600 2,045 600 2,004

Payments to subsidiaries – – (5,668) (7,072)

Net cash flows from/(used in)investing activities 1,650 (16,495) (1,932) (7,437)

Cash flows from financing activities

Finance costs – PICE units (1,541) (1,744) (1,541) (1,744)

Proceeds from borrowings 53,631 8,520 750 1,363

Repayment of borrowings (54,115) – (1,925) –

Payment for transaction costs (9) (89) (9) (88)

Distributions to unitholders (13,130) (2,532) (13,130) (2,532)

Net cash flows from/(used in)financing activities (15,164) 4,155 (15,855) (3,001)

Net increase/(decrease) in cashand cash equivalents 2,193 618 (1,624) 1,191

Net foreign exchange differences (26) (7) 8 (7)

Cash and cash equivalentsat beginning of period 3,991 3,380 2,983 1,799

Cash and cash equivalents atend of period 8 6,158 3,991 1,367 2,983

Cash Flow StatementFor the year ended 30 June 2007

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1. Trust informationThe financial report for the year ended 30 June 2007 was authorised for issue in accordance with a resolution of the directors dated

22 August 2007.

Challenger Wine Trust (CWT or ‘the Trust’) is a trust limited by units incorporated and domiciled in Australia whose units are publicly traded on

the Australian Securities Exchange (ASX).

The principal activity of the Trust during the year was the pooling of investors’ funds in the Trust through the private placement and public issue

of units and the investment of the Trust funds in wine industry properties and infrastructure assets. These assets are then leased to experienced

wine industry participants for periods generally of at least 10 years.

2. Summary of significant accounting policiesThe accounting policies which have been adopted in the preparation of the financial statements are stated to assist in a general understanding

of this report.

(a) Basis of preparationThe financial report is a general purpose financial report, which has been prepared in accordance with the requirements of the Constitution,

the Corporations Act 2001, applicable Accounting Standards and other mandatory professional reporting requirements.

The financial report has also been prepared on an historical cost basis, except for investment properties, vines, winery land and buildings,

derivative financial instruments and available for sale financial assets, which have been measured at fair value.

The accounting policies adopted in preparing these consolidated financial statements have been consistently applied by CWT unless

otherwise specified.

The financial report is presented in Australian dollars and all values are rounded to the nearest thousand dollars ($’000) unless otherwise

stated under the option available to the Trust under ASIC Class Order 98/100. The trust is an entity to which the class order applies.

(b) Statement of complianceExcept for the amendments to AASB 101: Presentation of Financial Statements, which CWT has early adopted, Australian Accounting

Standards and Interpretations that have recently been issued or amended but are not yet effective have not been adopted by CWT for the

annual reporting period ending 30 June 2007.

The following standards and amendments were available for early adoption but have not been applied by CWT in these financial statements:

• AASB 7: Financial Instruments: Disclosure replacing the presentation requirements of financial instruments under AASB 132: Financial

Instruments: Disclosure and Presentation. AASB 7 is applicable for annual reporting periods beginning on or after 1 January 2007.

• AASB 2005-10: Amendments to Australian Accounting Standards makes consequential amendments to AASB 132: Financial Instruments:

Disclosure and Presentation, AASB 101: Presentation of Financial Statements, AASB 114: Segment Reporting, AASB 117: Leases,

AASB 133: Earnings per Share, AASB 139: Financial Instruments: Recognition and Measurement, AASB 1: First-time Adoption of AIFRS,

AASB 4: Insurance Contracts, AASB 1023: General Insurance Contracts and AASB 1028: Life Insurance Contracts, arising from the release

of AASB 7. AASB 2005-10 is applicable for annual reporting periods beginning on or after 1 January 2007.

• AASB 8: Operating Segments. This is applicable for annual reporting periods beginning on or after 1 January 2009.

CWT plans to adopt AASB 7 and AASB 2005-10 in the year ending 30 June 2008. The initial application of AASB 7 and AASB 2005-10

is not expected to have an impact on the financial results of CWT as the standard and the amendment are concerned only with disclosures.

A summary of the significant accounting policies of the Group under AIFRS are disclosed below.

The financial report complies with Australian Accounting Standards, which include Australian equivalents to IFRS. The financial report

also complies with IFRS.

Notes to the financial statementsFor the year ended 30 June 2007

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2. Summary of significant accounting policies (continued)(c) Restatement of prior period comparatives

After discussions and agreement with ASIC, CWT has restated its prior period comparatives to take into account a change in the treatment

of vines, investment properties, integral infrastructure and water rights owned by the Trust.

Previously the integral infrastructure and water rights were reported at fair value as part of vines (including integral infrastructure and water

rights) under AASB 141: Agriculture.

CWT has identified two types of water rights owned by the Trust:

(i) Separable and tradeable water rights that are able to be separately identified from properties.

(ii) Water rights that are not able to be separately identified from properties with no market defined cost base.

Separable and tradeable water rights are recognised under AASB 138: Intangible Assets as an intangible asset and are accounted for using the

cost model until such time as an actively traded market for such rights can be identified, after which the rights would be carried at fair value.

Integral infrastructure and water rights with no separate market defined cost base are recognised under AASB 140: Investment Property

as part of the investment properties to which they are integrally linked.

Vines, now excluding any integral infrastructure and water rights, are carried at fair value under AASB 141: Agriculture.

There has been no impact on the distributable earnings of the Trust.

The changes to the 30 June 2006 restated balances are detailed below:

Challenger Wine TrustExtract from the balance sheet

Consolidated Consolidated Parent Parent

Restated Restated30 June 2006 30 June 2006 30 June 2006 30 June 2006

$’000 $’000 $’000 $’000

Non-current assets

Investment properties 38,194 160,674 9,299 45,617

Vines 244,377 103,727 76,904 34,874

Intangible assets – 15,827 – 3,943

282,571 280,228 86,203 84,434

Decrease in non-current assets due torecognising water rights at cost ratherthan fair value (2,343) (1,769)

Notes to the financial statements (continued)F

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2. Summary of significant accounting policies (continued)(c) Restatement of prior period comparatives (continued)

Challenger Wine TrustExtract from the statement of changes in equity

Consolidated Consolidated Parent Parent

Retained Retained Retained RetainedEarnings Earnings Earnings Earnings

Restated Restated30 June 2006 30 June 2006 30 June 2006 30 June 2006

$’000 $’000 $’000 $’000

Balance at 1 July 2005 12,682 12,682 (1,815) (1,815)

Profit for the period 16,122 13,779 10,409 8,640

Distribution to unitholders (13,175) (13,175) (13,175) (13,175)

Balance as at 30 June 2006 15,629 13,286 (4,581) (6,350)

Decrease in retained earnings dueto recognising water rights at costrather than fair value (2,343) (1,769)

Challenger Wine TrustExtract from the income statement

Consolidated Consolidated Parent Parent

Restated Restated30 June 2006 30 June 2006 30 June 2006 30 June 2006

$’000 $’000 $’000 $’000

Net operating income 13,171 13,171 13,171 13,171

Unrealised foreign exchange losses – – (1,240) (1,240)

Net fair value movement innon-current assets 2,951 608 (1,522) (3,291)

Net profit 16,122 13,779 10,409 8,640

Decrease in net profit dueto recognising water rights atcost rather than fair value (2,343) (1,769)

Notes to the financial statements (continued)F

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2. Summary of significant accounting policies (continued)(c) Restatement of prior period comparatives (continued)

Reconciliation of movement in earnings per ordinary unit and diluted earnings per ordinary unit:

Consolidated Parent

Cents per Cents perunit unit

Earnings per ordinary unit

Basic earnings per ordinary unit 11.09 7.16

Decrease due to restatement (1.61) (1.22)

Restated basic earnings per ordinary unit 9.48 5.94

Diluted earnings per ordinary unit

Diluted earnings per ordinary unit 10.57 7.19

Decrease due to restatement (1.39) (1.05)

Restated diluted earnings per ordinary unit 9.18 6.14

(d) Basis of consolidationThe consolidated financial statements comprise the financial statements of CWT and its subsidiaries (‘the Group’).

The financial statements of subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting

policies.

In preparing the consolidated financial statements, all intercompany balances and transactions, including unrealised profits arising

from intra-group transactions, have been eliminated in full.

Controlled entities are consolidated from the date on which the parent obtains control and cease to be consolidated from the date on

which control is transferred out of CWT. Where loss of control over an entity occurs, the consolidated financial statements include the

results for the part of the reporting period during which CWT had control.

(e) Significant accounting judgementsIn the process of applying the Group’s accounting policies, management has made the following judgement, apart from those involving

estimations, which have the most significant effect on the amounts recognised in the financial statements:

Operating lease commitments – group as lessor

The Group has entered into commercial property leases on its investment property portfolio. The Group has determined that it retains

all the significant risks and rewards of ownership of these properties and has thus classified the leases as operating leases.

(f) RevenueRevenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably

measured. Revenue brought to account but not received at balance date is recognised as a receivable.

Rental income arising on investment properties is recognised in accordance with the provisions of the lease. The basic rent rate is increased

annually at a rate not greater than CPI and in accordance with the terms of the lease. Contingent rental income is recognised as income

in the periods in which it is earned. All rental income is recognised net of Goods and Services Tax (GST).

Interest income is recognised as interest accrues using the effective interest method.

Distribution and dividend income is recognised when the Group’s right to receive the payment is established.

Notes to the financial statements (continued)F

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2. Summary of significant accounting policies (continued)(g) Leases

Vineyards and wineries are leased to vineyard operators and/or wine companies under long-term contracts, typically for 10 year terms.

Rentals are paid generally monthly or quarterly, based on a premium over bond rates. Leases are renewable at the lessee’s option after

the expiration of the initial lease term, in renewal periods of not less than five years.

Under the terms and conditions of the lease contract, lessees are responsible for the following:

• payment of relevant rates, taxes and levies;

• costs incurred to preserve and maintain the land and the vines growing in the land in accordance with Best Viticultural Practice,

including pruning, irrigation, fertilisation, etc;

• expenditure on any additional plant that will remain the lessee’s property;

• maintenance, repair and replacement of items of a structural and or capital nature; and

• all operational costs related to the growing of grapes.

The Trust will reimburse the lessee for any agreed alterations and additions to the leased vineyards and wineries, with rental payments

adjusted accordingly.

The vineyard properties are subject to call options, which have been granted to the lessees. These options are exercisable upon expiry

of the initial lease term or at each five year increment at varying dates between June 2007 and June 2020. The exercise price of the options

is to be the higher of cost or market value as determined by an independent valuation if required.

Lease agreements entered into with lessees over vineyard properties and wineries are considered to be operating leases given that the

Group retains substantially all the risks and benefits of ownership of the leased assets. Initial directs costs incurred in negotiating an

operating lease are added to the carrying amount of the leased asset.

(h) Cash and cash equivalentsCash and short-term deposits in the balance sheet comprise cash at bank and in hand and short-term deposits with an original maturity of

three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

For the purposes of the cash flow statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net of

outstanding bank overdrafts.

(i) Trade and other receivablesTrade receivables, which generally have 15-30 day terms, are recognised and carried at original invoice amount less an allowance for

any uncollectible amounts. An allowance for doubtful debts is made when there is objective evidence that the Group will not be able

to collect the debt. Bad debts are written off when identified.

(j) Derivative financial instruments and hedgingThe Group uses derivative financial instruments such as interest rate swaps to hedge its risks associated with interest rate fluctuations.

Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and

are subsequently remeasured to fair value. Derivatives are carried as assets when their fair value is positive and as liabilities when their

fair value is negative.

Any gains or losses arising from changes in the fair value of derivatives, except for those that qualify as cash flow hedges, are taken

directly to net profit or loss for the year.

The fair value of interest rate swap contracts are determined by reference to market values for similar instruments.

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2. Summary of significant accounting policies (continued)(j) Derivative financial instruments and hedging (continued)

For the purpose of hedge accounting, hedges are classified as cash flow hedges when they hedge exposure to variability in cash flows

that is attributable either to a particular risk associated with a recognised asset or liability or to a forecast transaction.

At the inception of a hedge relationship, the Group formally designates and documents the hedge relationship to which the Group wishes

to apply hedge accounting and the risk management objectives and strategies for undertaking the hedge. The documentation includes

identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the entity will assess

the hedging instrument’s effectiveness in offsetting the exposure to changes in the hedged item’s cash flows attributable to the hedged risk.

Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing

basis to determine that they actually have been highly effective throughout the financial reporting periods for which they were designated.

Hedges that meet the strict criteria for hedge accounting are accounted for as follows:

(i) Cash flow hedges

Cash flow hedges are hedges of the Group’s exposure to variability in cash flows that is attributable to a particular risk associated with

a recognised asset or liability or a highly probable forecast transaction and that could affect profit or loss. The effective portion of the

gain or loss on the hedging instrument is recognised directly in equity, while the ineffective portion is recognised in profit or loss.

Amounts taken to equity are transferred to the income statement when the hedged transaction affects profit or loss, such as when

hedged income or expenses are recognised or when a forecast sale or purchase occurs. When the hedged item is the cost of a non-

financial asset or liability, the amounts taken to equity are transferred to the initial carrying amount of the non-financial asset or liability.

If the forecast transaction is no longer expected to occur, amounts previously recognised in equity are transferred to the income statement.

If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as a hedge is

revoked, amounts previously recognised in equity remain in equity until the forecast transaction occurs. If the related transaction is not

expected to occur, the amount is taken to the income statement.

(k) Derecognition of financial assets and financial liabilities(i) Financial assets

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when:

• the rights to receive cash flows from the asset have expired;

• the Group retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material

delay to a third party under a ‘pass-through’ arrangement; or

• the Group has transferred its rights to receive cash flows from the asset and either (a) has transferred substantially all the risk and

rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred

control of the asset.

When the Group has transferred its rights to receive cash flows from an asset and has neither transferred nor retained substantially all

the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Group’s continuing

involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the

lower of the original carrying amount of the asset and the maximum amount of consideration received that the Group could be required

to repay.

When continuing involvement takes the form of a written and/or purchased option (including a cash-settled option or similar provision)

on the transferred asset, the extent of the Group’s continuing involvement is the amount of the transferred asset that the Group may

repurchase, except that in the case of a written put option (including a cash-settled option or similar provision) on an asset measured

at fair value, the extent of the Group’s continuing involvement is limited to the lower of the fair value of the transferred asset and the

option exercise price.

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2. Summary of significant accounting policies (continued)(k) Derecognition of financial assets and financial liabilities (continued)

(ii) Financial liabilities

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

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of

an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability

and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in profit or loss.

(l) Impairment of financial assetsThe Group assesses at each balance sheet date whether a financial asset or group of financial assets is impaired.

(i) Financial assets carried at amortised cost

If there is objective evidence that an impairment loss on loans and receivables carried at amortised cost has been incurred, the amount

of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows

(excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate (i.e. the

effective interest rate computed at initial recognition). The carrying amount of the asset is reduced either directly or through use of

an allowance account. The amount of the loss is recognised in profit or loss.

The Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant,

and individually or collectively for financial assets that are not individually significant. If it is determined that no objective evidence of

impairment exists for an individually assessed financial asset, whether significant or not, the asset is included in a group of financial

assets with similar credit risk characteristics and that group of financial assets is collectively assessed for impairment. Assets that are

individually assessed for impairment and for which an impairment loss is or continues to be recognised are not included in a collective

assessment of impairment.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring

after the impairment was recognised, the previously recognised impairment loss is reversed. Any subsequent reversal of an impairment

loss is recognised in profit or loss, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date.

(ii) Available-for-sale investments

If there is objective evidence that an available-for-sale investment is impaired, an amount comprising the difference between its cost

(net of any principal repayment and amortisation) and its current fair value, less any impairment loss previously recognised in profit

or loss, is transferred from equity to the income statement. Reversals of impairment losses for equity instruments classified as available-

for-sale are not recognised in profit. Reversals of impairment losses for debt instruments are reversed through profit or loss if the increase

in an instrument’s fair value can be objectively related to an event occurring after the impairment loss was recognised in profit or loss.

(m) Foreign currency translationBoth the functional and presentation currency of Challenger Wine Trust and its Australian subsidiaries is Australian dollars. The functional

currency of the New Zealand subsidiary (Delegat’s Trust) is New Zealand dollars and is reported in Australian dollars.

Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange rates ruling at the date of the

transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance

sheet date.

All exchange differences in the consolidated financial report are taken to profit or loss with the exception of differences on foreign

currency borrowings that provide a hedge against a net investment in a foreign entity. These are taken directly to equity until the disposal

of the net investment, at which time they are recognised in the profit or loss.

Tax charges and credits attributable to exchange differences on those borrowings are also recognised in equity.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at

the date of the initial transaction.

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2. Summary of significant accounting policies (continued)(m) Foreign currency translation (continued)

Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair

value was determined.

As at the reporting date the assets and liabilities of the overseas subsidiary are translated into the presentation currency of

Challenger Wine Trust at the rate of exchange ruling at the balance sheet date and the income statements are translated at

the spot rate on the effective date of each transaction.

The exchange differences arising on the retranslation are taken directly to a separate component of equity.

On disposal of a foreign entity, the deferred cumulative amount recognised in equity relating to that particular foreign operation is

recognised in profit or loss.

(n) Income taxEligible investment business

Under current legislation the Trust undertakes activities of an ‘eligible investment business’, that is investing in land and vines for the

purpose of, or primarily for the purpose of deriving rent, and is, therefore, taxed as a trust estate.

It is the opinion of the directors that the Trust has not conducted activities outside of the scope of an eligible investment business

during the financial year ended 30 June 2007.

Distributions to investors will be taxed as distributions of net income or corpus.

(o) Goods and Services TaxRevenues, expenses and assets are recognised net of the amount of GST except:

• when the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the

GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and

• receivables and payables, which are stated with the amount of GST included.

The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in

the balance sheet.

Cash flows are included in the cash flow statement on a gross basis and the GST component of cash flows arising from investing

and financing activities, which is recoverable from, or payable to, the taxation authority, are classified as operating cash flows.

Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.

(p) Investment propertiesInvestment properties, which include vineyard land and winery land and buildings (including integral infrastructure and water rights)

are measured initially at cost including transaction costs. Subsequent to initial recognition, investment properties are stated at fair

value, which reflects market conditions at the balance sheet date. Gains or losses arising from changes in the fair values of investment

properties are recognised in profit or loss in the year in which they arise.

Valuations of investment properties are obtained annually from independent qualified valuers. The valuations have been completed

in accordance with AASB 140: Investment Property and the fair value definitions, and the AIFRS determination that fair value may

be assessed utilising a discounted cash flow approach. The directors of the Responsible Entity make reference to these independent

valuations when assessing the fair value of investment properties at each reporting date. Gains or losses arising from changes in

the fair values of investment properties are recognised in profit or loss in the year in which they arise.

Water rights are included in investment properties when they are not legally separate from such properties and for which there

is no market against which cost can be reliably determined.

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2. Summary of significant accounting policies (continued)(q) Vines

Vines are initially recorded at cost including transaction costs. Subsequent to initial recognition the vines are stated at fair value.

Gains or losses arising from changes in the fair values of vines are recognised in profit or loss in the year in which they arise.

Independent valuations of vineyards are obtained annually from suitably qualified valuers. The valuations have been completed in

accordance with AASB 141: Agriculture and the fair value definitions, and the AIFRS determination that fair value may be assessed

utilising a discounted cash flow approach. The directors of the Responsible Entity make reference to these independent valuations

when assessing the fair value of vines at each reporting date.

The directors’ valuations of vines are determined by discounting the expected future cash flows from the vines.

(r) Plant and equipmentWinery plant and equipment is stated at historical cost, including relevant transactions costs, less accumulated depreciation and any

accumulated impairment losses.

Impairment

At each reporting date the Group assesses whether there is an indication that an asset may be impaired. If any such indication exists,

or when annual impairment testing for an asset is required, the Group makes an estimate of the asset’s recoverable amount. An asset’s

recoverable amount is the higher of its fair value less costs to sell and its value in use and is determined for an individual asset, unless

the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets and the asset’s

value in use cannot be estimated to be close to its fair value. In such cases the asset is tested for impairment as part of the cash-generating

unit to which it belongs. When the carrying amount of an asset or cash-generating unit exceeds its recoverable amount, the asset or

cash-generating unit is considered impaired and is written down to its recoverable amount.

In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects

current market assessments of the time value of money and the risk specific to the asset. Impairment losses relating to continuing operations

are recognised in those expense categories consistent with the function of the impaired asset unless the asset is carried at revalued amount

(in which case the impairment loss is treated as a revaluation decrease).

An assessment is also made at each reporting date as to whether there is any indication that previously recognised impairment losses may

no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment

loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment

loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot

exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in

prior years. Such reversal is recognised in profit or loss. After such a reversal the depreciation charge is adjusted in future periods to allocate

the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.

(s) DepreciationInvestment properties and vines (including integral infrastructure and water rights) are not required to be depreciated as per AASB 140:

Investment properties and AASB 141: Agriculture respectively. Winery plant and equipment are depreciated, on a straight-line basis, over

their expected useful life. Major depreciation periods are:

2007 2006

Grape processing plant 30 years 30 years

Storage 50 years 50 years

Winery plant 20 years 20 years

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2. Summary of significant accounting policies (continued)(t) Investments and other financial assets

Financial assets in the scope of AASB 139: Financial Instruments: Recognition and Measurement are classified as either financial assets

at fair value through profit or loss, loans and receivables, held-to-maturity investments, or available-for-sale investments, as appropriate.

When financial assets are recognised initially, they are measured at fair value, plus, in the case of investments not at fair value through

profit or loss, directly attributable transaction costs. The Group determines the classification of its financial assets after initial recognition

and, when allowed and appropriate, re-evaluates this designation at each financial year-end.

(i) Available-for-sale investments

Available-for-sale investments are those non-derivative financial assets that are designated as available-for-sale. After initial recognition

available-for-sale investments are measured at fair value with gains or losses being recognised as a separate component of equity until

the investment is derecognised or until the investment is determined to be impaired, at which time the cumulative gain or loss previously

reported in equity is recognised in profit or loss.

(ii) Loans

Loans are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such assets

are carried at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the loans are

derecognised or impaired, as well as through the amortisation process.

(u) Intangible assets(i) Separable and tradeable water rights

Separable and tradeable water rights, which are included in intangible assets, provide the owner with an allocation of irrigation

water for as long as the rights are held. Separable and tradeable water rights are able to be legally separated from properties and

are able to be traded.

Separable and tradeable water rights are recognised at cost less impairment losses. The cost is not amortised as the water licences

have indefinite useful lives.

Due to the water rights being used for the provision of permanent planting of crops (vines) these water rights are held to support

the vines and not for regular trading purposes.

(v) Trade and other payablesTrade and other payables are carried at amortised cost and represent liabilities for goods and services provided to the Group prior to

the end of the financial year that are unpaid and arise when the Group becomes obliged to make future payments in respect of the

purchase of the goods and services.

(w) Interest-bearing loans and borrowingsAll loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable transaction costs.

After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest

method. Fees paid on the establishment of loan facilities that are yield related are included as part of the carrying amount of the loans

and borrowings.

Borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement of the liability for at least

12 months after the balance sheet date.

Gains and losses are recognised in profit or loss when the liabilities are derecognised.

Borrowing costs are recognised as an expense when incurred.

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2. Summary of significant accounting policies (continued)(x) Preferred Income Convertible Equity (PICE) units

During the year, in accordance with the PICE unit terms of issue, the Responsible Entity of CWT resolved to convert all 1,494,938 PICE

units on issue into ordinary units. The conversion was made on 27 April 2007 with 17,204,445 new ordinary units issued. As such all

liabilities recognised in relation to the PICE units were derecognised on this day.

During the period before conversion, the PICE unitholders continued to be entitled to a yield at the rate of 9.0% per annum, which was

indexed annually in arrears in accordance with increases in the Australian Consumer Price Index. The distributions paid to PICE unitholders

are treated as a finance cost.

(y) Contributed equityOrdinary units are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a

deduction, net of tax, from the proceeds.

(z) Earnings per unitBasic earnings per unit is calculated as net profit attributable to unitholders of the parent, adjusted to exclude any costs of servicing equity

(other than distributions) and PICE distributions, divided by the weighted average number of ordinary units, adjusted for any bonus element.

Diluted earnings per unit are calculated as net profit attributable to unitholders of the parent, adjusted for:

• cost of servicing equity (other than distributions) and PICE distributions;

• the after tax effect of distributions and interest associated with dilutive potential ordinary units that have been recognised as expenses; and

• other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary units;

divided by the weighted average number of ordinary units and dilutive potential ordinary units, adjusted for any bonus element.

3. Segment informationThe Group operates entirely within Australasia, investing in vineyard properties and wine infrastructure assets for lease to vineyard and

winery operators.

There are no distinguishable business segments or geographical segments within the Trust which are subject to a different risk and return.

Notes to the financial statements (continued)F

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4. RevenueConsolidated Consolidated Parent Parent

Restated Restated30 June 2007 30 June 2006 30 June 2007 30 June 2006

$’000 $’000 $’000 $’000

Other income

Interest income 404 307 188 272

Interest income – wholly owned group entities – – 1,740 1,612

Dividend income 101 27 101 27

Distributions by subsidiaries – – 8,428 7,588

Realised foreign exchange gains – – 10 57

505 334 10,467 9,556

5. ExpensesConsolidated Consolidated Parent Parent

Restated Restated30 June 2007 30 June 2006 30 June 2007 30 June 2006

Note $’000 $’000 $’000 $’000

Finance costs

Interest expense – bank borrowings 10,471 10,160 3,413 3,442

Interest expense – PICE units 1,156 1,744 1,156 1,744

11,627 11,904 4,569 5,186

Operating expenses

Custodian fees 105 86 81 71

Consultant fees 350 114 200 101

Auditor’s remuneration 25 84 81 84 81

Depreciation 385 382 385 382

Realised foreign exchange losses 26 – – –

Other costs 248 366 241 360

1,198 1,029 991 995

Notes to the financial statements (continued)F

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6. Distributions paid and proposedThe following distributions are paid or payable for the period ended 30 June 2007:

Consolidated Consolidated Parent Parent

Restated Restated30 June 2007 30 June 2006 30 June 2007 30 June 2006

$’000 $’000 $’000 $’000

Distributions proposed and recognised forordinary unitholders as a liability at year end 3,892 3,519 3,892 3,519

Distributions paid during the year 10,434 9,656 10,434 9,656

Total distributions paid or payablefrom current year profits 14,326 13,175 14,326 13,175

Prior year distributions paid duringthe year from prior year profits 3,519 3,515 3,519 3,515

7. Earnings per unitThe following reflects the income and unit data used in the basic and diluted earnings per unit computations:

Consolidated Consolidated

Restated30 June 2007 30 June 2006

$’000 $’000

Net profit attributable to ordinary unitholders of the parent from continuing operations 7,875 13,779

Net profit attributable to ordinary unitholders of the parent (used in calculating basic EPU) 7,875 13,779

Thousands Thousands

Weighted average number of ordinary units for basic earnings per unit 156,172 145,358

Effect of dilution:

PICE units – 23,685

Weighted average number of ordinary units adjusted for the effect of dilution 156,172 169,043

There have been no other transactions involving ordinary units or potential ordinary units between the reporting date and the date of

completion of these financial statements.

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8. Cash and cash equivalentsFor the purpose of the cash flow statement, cash and cash equivalents comprise the following at 30 June:

Consolidated Consolidated Parent Parent

Restated Restated30 June 2007 30 June 2006 30 June 2007 30 June 2006

$’000 $’000 $’000 $’000

Cash at bank and in hand 3,907 2,173 1,363 1,165

Term deposits 2,251 1,818 4 1,818

6,158 3,991 1,367 2,983

Cash at bank earns interest at floating rates based on daily bank deposit rates.

Short-term deposits are made for varying periods of between seven days and three months, depending on the immediate

cash requirements of the Group and earn interest at the respective short-term deposit rates.

(a) Reconciliation of net profit to net cash flows from operations

Consolidated Consolidated Parent Parent

Restated Restated30 June 2007 30 June 2006 30 June 2007 30 June 2006

$’000 $’000 $’000 $’000

Net profit 7,875 13,779 14,708 8,640

Adjustments for:

Depreciation of non-current assets 385 382 385 382

Amortisation of borrowing costs 138 165 29 49

Unrealised losses from currency fluctuations 26 – (1,516) 1,240

PICE units – finance costs classified as finance activities 1,156 1,744 1,156 1,744

Net fair value movement in non-current assets 6,456 (608) 1,139 3,291

Changes in assets and liabilities

(Increase)/decrease in trade and other receivables (437) 88 212 (3,938)

(Decrease)/increase in unearned income 157 (2,446) 153 (440)

(Decrease)/increase in trade and other payables (49) (146) (103) 661

Net cash flows from operating activities 15,707 12,958 16,163 11,629

(b) Non-cash financing activitiesNon-cash and financing activities during the year on normal terms and conditions include:

Consolidated Consolidated Parent Parent

Restated Restated30 June 2007 30 June 2006 30 June 2007 30 June 2006

$’000 $’000 $’000 $’000

Reinvestment of ordinary unitholders’ distributions 806 10,211 806 10,211

Reinvestment of PICE unitholders’ distributions 18 438 18 438

824 10,649 824 10,649

(c) Disclosure of financing facilitiesRefer to Note 20.

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9. Trade and other receivablesConsolidated Consolidated Parent Parent

Restated Restated30 June 2007 30 June 2006 30 June 2007 30 June 2006

$’000 $’000 $’000 $’000

Trade receivables (i) 1,030 331 408 331

Allowances for impairment losses – – – –

Receivables from subsidiaries (ii) – – 899 9,864

Other – 43 – 43

Total trade and other receivables 1,030 374 1,307 10,238

(i) Trade receivables are non-interest-bearing and generally 15-30 day terms. An allowance for doubtful debts is made when there is objective evidence that a trade receivable is impaired. No allowances have been recognised as an expense for the current year.

(ii) Receivable from subsidiaries is comprised of interest charged on convertible notes issued by the parent entity to applicable subsidiaries and equity distributions.

10. PrepaymentsConsolidated Consolidated Parent Parent

Restated Restated30 June 2007 30 June 2006 30 June 2007 30 June 2006

$’000 $’000 $’000 $’000

Prepaid interest – 351 – 348

Other (i) 122 536 77 519

Total prepayments 122 887 77 867

(i) Other prepayments represents amounts paid in advance for property developments.

11. Other financial assetsConsolidated Consolidated Parent Parent

Restated Restated30 June 2007 30 June 2006 30 June 2007 30 June 2006

$’000 $’000 $’000 $’000

Current

Loan notes – 600 – 600

– 600 – 600

Non-current

Loan notes (i) 397 397 397 397

Units in controlled entities at cost – – 20,693 20,693

397 397 21,090 21,090

(i) The loan notes are repayable in April 2009. Interest is earned at the applicable rate of 10.75% per annum.

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12. Available-for-sale assetsConsolidated Consolidated Parent Parent

Restated Restated30 June 2007 30 June 2006 30 June 2007 30 June 2006

$’000 $’000 $’000 $’000

At fair value

Shares – unlisted at fair value 500 500 500 500

Convertible notes in controlled entities – – 75,941 59,539

500 500 76,441 60,039

Available-for-sale investments consist of investments in ordinary shares, and therefore have no fixed maturity date or coupon rate.

The fair value of the unlisted available-for-sale investments has been estimated using valuation techniques based on assumptions that are not

supported by observable market prices or rates. Management believes the estimated fair values resulting from the valuation techniques and

recorded in the balance sheet and the related changes in fair values recorded in the income statement are reasonable and the most appropriate

at the balance sheet date.

13. Investment propertiesConsolidated Consolidated Parent Parent

Restated Restated30 June 2007 30 June 2006 30 June 2007 30 June 2006

$’000 $’000 $’000 $’000

Investment property

Beginning of the year at fair value 160,674 129,969 45,617 45,761

Additions – 1,308 – –

Disposals (5,970) (1,894) (5,970) (1,307)

Foreign currency fluctuations 4,871 (3,712) – –

Net fair value movement in non-current assets 5,437 35,003 6,049 1,163

Assets included in a disposal group classifiedas held for sale (3,654) – (3,654) –

End of the year at fair value 161,358 160,674 42,042 45,617

Revaluation of investment properties

Investment properties, which include land, buildings, integral infrastructure and water rights that are not able to be separately identified from

properties and with no market defined cost base are stated at fair value which has been determined based on valuations from independent

accredited industry valuers who are specialists in valuing these types of investment properties. Valuations have been performed at 30 June 2007

and 30 June 2006. The directors of the Responsible Entity make reference to these independent valuations when assessing the fair value of

investment properties at each reporting date.

Assets pledged as security

First mortgages have been granted as security for bank loans (Note 20) over all investment properties and vines. The terms of the first mortgages

preclude the assets being sold or being used as security for further mortgages without the permission of the first mortgage holder.

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14. VinesConsolidated Consolidated Parent Parent

Restated Restated30 June 2007 30 June 2006 30 June 2007 30 June 2006

$’000 $’000 $’000 $’000

Vines

Beginning of the year at fair value 103,727 127,354 34,874 38,022

Additions 2,252 15,401 167 2,417

Disposals – (523) – (523)

Foreign currency fluctuations 2,533 (4,110) – –

Net fair value movement in non-current assets (11,893) (34,395) (7,191) (5,042)

Assets included in a disposal group classifiedas held for sale (1,628) – (1,628) –

End of the year at fair value 94,991 103,727 26,222 34,874

Revaluation of vines

Independent valuations of vineyard properties are obtained annually from suitably qualified valuers. The directors’ valuations of vines are determined

by discounting the expected future cash flows from the vines.

Assets pledged as security

First mortgages have been granted as security for bank loans (Note 20) over all investment properties and vines. The terms of the first

mortgages preclude the assets being sold or being used as security for further mortgages without the permission of the first mortgage holder.

15. Intangible assetsConsolidated Consolidated Parent Parent

Restated Restated30 June 2007 30 June 2006 30 June 2007 30 June 2006

$’000 $’000 $’000 $’000

Intangible assets(separable and tradeable water rights)

Beginning of the year at cost less impairment losses 15,827 15,371 3,943 3,943

Additions 1,168 456 1,168 –

Disposals – – – –

Allowances for impairment losses – – – –

End of the year at cost less impairment losses 16,995 15,827 5,111 3,943

Separable and tradeable water rights

Separable and tradeable water rights, which are included in intangible assets, provide the owner with an allocation of irrigation water for as

long as the rights are held. Separable and tradeable water rights are able to be legally separated from properties and are able to be traded.

Separable and tradeable water rights are recognised at cost less impairment losses. The cost is not amortised as the water licences are

considered to have indefinite useful lives.

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16. Plant and equipmentConsolidated Consolidated Parent Parent

Restated Restated30 June 2007 30 June 2006 30 June 2007 30 June 2006

$’000 $’000 $’000 $’000

Winery plant and equipment

Beginning of the year at net carrying value 7,016 7,634 7,016 7,634

Additions (at cost) 1,732 – 1,732 –

Disposals (WDV) – (237) – (237)

Depreciation for the year (385) (381) (385) (381)

Assets included in a disposal group classifiedas held for sale (3,409) – (3,409) –

End of the year at net carrying value 4,954 7,016 4,954 7,016

Office plant and equipment

Beginning of the year at net carrying value 8 9 8 9

Additions (at cost) – – – –

Depreciation for the year (8) (1) (8) (1)

End of the year at net carrying value – 8 – 8

4,954 7,024 4,954 7,024

Consolidated Consolidated Parent Parent

Winery P & E Office P & E Winery P & E Office P & E

$’000 $’000 $’000 $’000

1 July 2006

Cost 7,826 10 7,826 10

Accumulated depreciation (810) (2) (810) (2)

Net carrying amount 7,016 8 7,016 8

30 June 2007

Cost 5,157 – 5,157 –

Accumulated depreciation (203) – (203) –

Net carrying amount 4,954 – 4,954 –

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17. Investment properties, vines, intangible assets, assets of a disposal group classified as held for sale and plant and equipment

Details of the investment properties, vines, intangible assets, assets of a disposal group classified as held for sale and plant and equipment are

presented below:

Date of 2007 2006 2007 2006latest Fair Fair Carrying Carrying

Acquisition independent value value value valueDescription date Country valuation $’000 $’000 $’000 $’000

Corryton Park Vineyard (i) Feb 1998 Australia Dec 2006 3,100 3,100 3,100 3,100Summers Hill Vineyard (i) Feb 1998 Australia Dec 2006 1,500 1,500 1,500 1,500Bethany Creek and Vine Vale Vineyards (i) Oct 1998 Australia Dec 2006 1,700 1,800 1,700 1,800Cowra Station Vineyard (ii) Oct 1998 Australia Dec 2006 3,500 3,500 3,500 3,500Waikerie Vineyard (ii) Oct 1998 Australia Dec 2006 1,900 1,800 1,900 1,706Dalswinton and Inglewood Vineyards (ii) (xii) Jul 1999 Australia Dec 2006 5,700 5,500 5,700 5,500Boh River Vineyard (i) Jun 2000 Australia Dec 2006 10,086 9,200 9,452 7,525Gundagai Vineyard (iii) Sep 2000 Australia Dec 2006 16,022 16,462 15,564 16,462Schubert’s Vineyard (i) Nov 2001 Australia Dec 2006 6,200 6,250 6,200 6,250Chapel Vineyard (iii) Dec 2001 Australia Dec 2006 2,800 2,900 2,800 2,900Cocoparra and Woods Vineyards (iii) (xiii) Apr 2003 Australia Dec 2006 9,750 9,595 9,750 9,595Gnangara Vineyard (iv) Apr 2003 Australia Dec 2006 5,900 5,700 5,900 5,700Poole’s Rock Vineyard and Winery (iv) Nov 2004 Australia Dec 2006 7,463 5,800 7,463 5,800Whitton Vineyard (iii) Mar 2005 Australia Dec 2006 3,800 3,800 3,800 3,800

Total held by parent entity before held for sale properties 79,421 76,907 78,329 75,138

Sandy Hollow Vineyard (ix) Nov 1998 Australia Dec 2006 2,800 4,100 2,800 4,100Hermitage Road Winery (ix) Oct 2001 Australia Jun 2007 3,887 3,887 3,887 3,887Trillians Hill Vineyard (ix) Jun 2002 Australia Jun 2006 1,100 1,450 1,100 1,450Grande Junction Vineyard (ix) Jun 2005 Australia N/A 904 6,875 904 6,875

Total held for sale assets 8,691 16,312 8,691 16,312

Total held by parent entity 88,112 93,219 87,020 91,450

Sirens Estate Vineyard (iv) Oct 2002 Australia Dec 2006 3,221 3,343 3,221 3,343Del Rios Vineyard (vi) (x) Jun 2003 Australia Jun 2007 50,000 52,102 50,000 52,102Balranald Vineyard (vi) Dec 2003 Australia Jun 2007 22,500 24,000 21,156 24,000Qualco East Vineyard (vi) Dec 2003 Australia Jun 2007 8,600 9,000 6,789 8,426Richmond Grove and Lawsons Vineyards (viii) Dec 2003 Australia Jun 2007 43,500 42,867 43,500 42,867Crownthorpe Vineyard (vii) Apr 2001 New Zealand Jun 2007 27,669 24,278 27,669 24,278Gimblett Vineyards (vii) (xii) Apr 2001 New Zealand Jun 2007 6,696 6,023 6,696 6,023Dashwood Vineyard (v) Oct 2002 New Zealand Dec 2006 23,259 20,888 23,259 20,888Rarangi Vineyard (v) Jun 2004 New Zealand Dec 2006 17,679 13,867 17,679 13,867

Total held by controlled entities 203,124 196,368 199,969 195,794

Total consolidated 291,236 289,587 286,989 287,244

Variance between carrying value and fair value at year end (xiv) (4,247) (2,343)

The Directors have assessed fair value by reference to the following valuers’ valuations as described in Notes 2(p) and 2(q).

(i) As valued by Alex Thamm, B.Bus (Prop), A.A.P.I., Agri Valuation & Advisory Certified Practising Valuer, Qualified Agent and Conveyancer, of McGees Property.

(ii) As valued by Angus Barrinton-Case, B. Bus (Prop), A.A.P.I., Agri Valuation & Advisory Certified Practising Valuer, of McGees Property.(iii) As valued by Colin Pickett, A.A.P.I., Certified Practising Valuer, of Colin Gaetjens & Co.(iv) As valued by Colin Gaetjens, F.A.P.I., (Val, P&M), R.E.I.V. (Aust), A.R.E.I. of Colin Gaetjens & Co.(v) As valued by Boyd Gross, B. Agr. (Rural Val), Dip. Bus. Std., A.N.Z.I.V, of Logan Stone.(vi) As valued by Angus Barrinton-Case, B. Bus (Prop), A.A.P.I., Agri Valuation & Advisory Certified Practising Valuer, of Colliers International

Consultancy and Valuation Pty Ltd.(vii) As valued by David Stark, B.Ag.Com., F.N.Z.I.V., F.P.I.N.Z. of Alexander Hayward Ltd.(viii) As valued by Jason Oster, B. Bus. Prop. (Val.), A.A.P.I., Dip. App. Sc. (Farm Management), Certified Practising Valuer of Knight Frank.(ix) Classified at 30 June 2007 as a disposal group classified as held for sale (refer to Note 18).(x) Previously known as Dos Rios Vineyard.(xi) Disclosed at 30 June 2006 as two individual properties, Gimblett Road Vineyard and Highway 50 Vineyard.(xii) Disclosed at 30 June 2006 as two individual properties, Dalswinton Vineyard and Inglewood Vineyard.(xiii) Disclosed at 30 June 2006 as two individual properties, Cocoparra Vineyard and Woods Vineyard.(xiv) Variance between carrying value and fair value at year end relates to intangible assets (water rights) carried at cost.

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17. Investment properties, vines, intangible assets, assets of a disposal group classified as held for sale and plant and equipment (continued)

The reconciliation of the consolidated book values for the combined investment properties, vines, intangible assets, assets of a disposal group

classified as held for sale and plant and equipment is detailed below:

Consolidated Consolidated

Restated30 June 2007 30 June 2006

$’000 $’000

Book value at the beginning of the year 287,244 280,328

Additions 5,152 17,165

Disposals (5,970) (2,654)

Depreciation for the year (385) (381)

Foreign currency fluctuations 7,404 (7,822)

Net fair value movement in non-current assets (i) (6,456) 608

Book value at the end of the year 286,989 287,244

(i) Net fair value movement in non-current assets for the year consists of:

(Decrease)/increase from revaluation of non-current assets (4,552) 2,951

(Decrease) in carrying value due to recognising intangible assets at cost (1,904) (2,343)

(6,456) 608

18. Assets and liabilities of a disposal group classified as held for sale(a) Details of assets held for sale

The Sandy Hollow Vineyard is being actively marketed for sale with the intention of disposing the property within the next 12 months.

The reason for the intended disposal is due to McGuigan Simeon Wines Ltd not exercising its option for a five year lease renewal or to

purchase the property at the end of the lease term. The current lease is due to expire in April 2009.

The Hermitage Road Winery is being actively marketed for sale with the intention of disposing the property within the next 12 months.

The reason for the intended disposal is due to McGuigan Simeon Wines Ltd not exercising its option for a five year lease renewal or to

purchase the property at the end of the lease term. The current lease is due to expire in June 2008.

On 5 March 2007, an agreement was reached for the disposal of the Trillians Hill Vineyard to Trillians Hill Vineyard Pty Ltd, the current lessee.

Settlement on the disposal of the Trillians Hill Vineyard is expected to occur on 1 December 2007 for $1.1 million, the current carrying value

at 30 June 2007.

During the year it was agreed between CWT and McGuigan Simeon Wines Ltd that the development of the Grande Junction Vineyard

would not proceed. All development costs, totalling $5.97 million, were repaid to CWT in February 2007 with the land carried at cost at

30 June 2007. An agreement has been reached to dispose the land to McGuigan Simeon Wines Ltd for marginally above its current book

value of $0.9 million.

The following table includes a summary of the properties classified as held for sale:

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18. Assets and liabilities of a disposal group classified as held for sale (continued)(a) Details of assets held for sale (continued)

30 June 2007Date of latest Carrying

Acquisition independent valuedate Country valuation $’000

Sandy Hollow Vineyard Nov 1998 Australia Dec 2006 2,800

Hermitage Road Winery Oct 2001 Australia Jun 2007 3,887

Trillians Hill Vineyard Jun 2002 Australia Jun 2006 1,100

Grande Junction Vineyard Jun 2005 Australia N/A 904

8,691

(b) Assets and liabilities classified as held for saleThe major classes of assets and liabilities held for sale at 30 June 2007 are as follows:

Consolidated Parent

30 June 2007 30 June 2007

$’000 $’000

Assets

Investment property 3,654 3,654

Vines 1,628 1,628

Plant and equipment 3,409 3,409

Assets of a disposal group classified as held for sale 8,691 8,691

Liabilities

Interest-bearing loans and borrowings (2,366) (2,366)

Liabilities directly associated with the assets classified as held for sale (2,366) (2,366)

Net assets attributable to a disposal group classified as held for sale 6,325 6,325

19. Trade and other payablesConsolidated Consolidated Parent Parent

Restated Restated30 June 2007 30 June 2006 30 June 2007 30 June 2006

$’000 $’000 $’000 $’000

Trade payables 2,034 1,931 987 942

2,034 1,931 987 942

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20. Interest-bearing loans and borrowings

Consolidated Consolidated Parent Parent

Restated Restated30 June 2007 30 June 2006 30 June 2007 30 June 2006

$’000 $’000 $’000 $’000

Current

Bank bill facilities – 1,925 – 1,925

– 1,925 – 1,925

Non-current

Bank bill facilities 132,027 127,210 39,654 41,834

132,027 127,210 39,654 41,834

Total interest-bearing liabilities associatedwith continuing operations 132,027 129,135 39,654 43,759

Liabilities directly associated with the assetsclassified as held for sale 2,366 – 2,366 –

Total interest-bearing loans and borrowings 134,393 129,135 42,020 43,759

Financing facilities availableAt reporting date, the following financing facilities had been negotiated and were available.

Consolidated Consolidated Parent Parent

Restated Restated30 June 2007 30 June 2006 30 June 2007 30 June 2006

$’000 $’000 $’000 $’000

Total facilities:

Bank overdraft 30 30 30 30

Secured bank bills 138,865 149,369 46,405 48,902

138,895 149,399 46,435 48,932

Facilities used at reporting date

Bank overdraft – – – –

Secured bank bills 134,393 129,135 42,020 43,759

134,393 129,135 42,020 43,759

Facilities unused at reporting date

Bank overdraft 30 30 30 30

Secured bank bills 4,472 20,234 4,385 5,143

4,502 20,264 4,415 5,173

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20. Interest-bearing loans and borrowings (continued)Bank overdraftThe bank overdraft is secured by a floating charge over certain of the Group’s assets, including its land and buildings.

The bank overdraft facility may be drawn at any time and is reviewed by the bank annually at which time it can elect to cancel the facility.

The bank may also cancel the facility at any time should the Group be in breach of its covenants or otherwise in default.

Assets pledged as securityThe carrying amounts of assets pledged as security for current and non-current interest-bearing liabilities are:

Consolidated Consolidated Parent Parent

Restated Restated30 June 2007 30 June 2006 30 June 2007 30 June 2006

$’000 $’000 $’000 $’000

Non-current

First-mortgage

Investment properties at fair value 161,358 160,674 42,042 45,617

Vines 94,991 103,727 26,222 34,874

Winery plant and equipment at net carrying value 4,954 7,016 4,954 7,016

Intangible assets 16,995 15,827 5,111 3,943

Assets of a disposal group classified as held for sale 4,804 – 4,804 –

Total non-current assets pledged as security 283,102 287,244 83,133 91,450

21. PICE unitsConsolidated Consolidated Parent Parent

Restated Restated30 June 2007 30 June 2006 30 June 2007 30 June 2006

$’000 $’000 $’000 $’000

PICE units

Opening balance at beginning of year 13,625 16,434 13,625 16,434

Issued during the year 18 438 18 438

Costs associated with the issue of units – (1) – (1)

Converted to ordinary units (13,643) (3,246) (13,643) (3,246)

Balance at the end of the year – 13,625 – 13,625

Units ’000 Units ’000 Units ’000 Units ’000

Movements in PICE units on issue

Opening balance at beginning of year 1,493 1,773 1,493 1,773

Issued during the year

– Distribution reinvestment plan 2 45 2 45

PICE units converted to ordinary units (1,495) (325) (1,495) (325)

Closing balance at end of year – 1,493 – 1,493

In accordance with the PICE unit terms of issue, the Responsible Entity of CWT resolved to convert all PICE units on issue into

ordinary units on 27 April 2007. As such all liabilities recognised in relation to the PICE units were derecognised on this day.

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22. Contributed equityConsolidated Consolidated Parent Parent

Restated Restated30 June 2007 30 June 2006 30 June 2007 30 June 2006

$’000 $’000 $’000 $’000

Ordinary units

Opening balance at beginning of year 131,206 117,846 131,206 117,846

Conversion of PICE units to equity (i) 13,643 – 13,643 –

Issued during the year 806 13,448 806 13,448

Costs associated with the issue of units (11) (88) (11) (88)

Equity balance at the end of the year 145,644 131,206 145,644 131,206

Units ’000 Units ’000 Units ’000 Units ’000

Movements in ordinary units on issue

Opening balance at beginning of year 151,957 136,138 151,957 136,138

Issued during the year

– Distribution reinvestment plan 1,151 11,823 1,151 11,823

– PICE units converted to ordinary units 17,205 3,996 17,205 3,996

Closing balance at end of year 170,313 151,957 170,313 151,957

(i) Conversion of PICE units to equity

Conversion of PICE units to equity 15,001 – 15,001 –

PICE issue costs transferred to equity (1,358) – (1,358) –

New equity recognised on PICE conversion 13,643 – 13,643 –

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23. Reserves and undistributed incomeRetained earningsMovements in retained earnings were as follows:

Consolidated Consolidated Parent Parent

Restated Restated30 June 2007 30 June 2006 30 June 2007 30 June 2006

$’000 $’000 $’000 $’000

Balance 1 July 13,286 12,682 (6,350) (1,815)

Net profit for the year 7,875 13,779 14,708 8,640

Distributions paid/payable (14,326) (13,175) (14,326) (13,175)

Balance 30 June 6,835 13,286 (5,968) (6,350)

Reconciliation of closing retained earnings:

Net fair value movement in non-current assets 6,835 13,291 (6,212) (5,073)

Unrealised foreign exchange losses – – 244 (1,272)

Under/(over) distributed income – (5) – (5)

Balance 30 June 6,835 13,286 (5,968) (6,350)

ReservesMovements in reserves were as follows:

Foreigncurrency Investment Cash flow

translation revaluation hedge Total

Consolidated $’000 $’000 $’000 $’000

At 1 July 2005 1,544 453 – 1,997

Transition to AIFRS on 1 July 2005 – – (2,666) (2,666)

Currency translation movements (1,517) – – (1,517)

Fair value movements in derivative financial instruments – – 906 906

At 30 June 2006 27 453 (1,760) (1,280)

Currency translation movements 942 – – 942

Fair value movements in derivative financial instruments – – 4,053 4,053

At 30 June 2007 969 453 2,293 3,715

Investment Cash flowrevaluation hedge Total

Parent $’000 $’000 $’000

At 1 July 2005 453 – 453

Transition to AIFRS on 1 July 2005 – (1,858) (1,858)

Currency translation movements – – –

Fair value movements in derivative financial instruments – 1,225 1,225

At 30 June 2006 453 (633) (180)

Currency translation movements – – –

Fair value movements in derivative financial instruments – 1,199 1,199

At 30 June 2007 453 566 1,019

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23. Reserves and undistributed income (continued)Nature and purpose of reservesInvestment revaluation reserve

This reserve records fair value changes on available-for-sale investments in unlisted shares.

Cash flow hedge reserve

This reserve records the portion of the gain or loss on a hedging instrument in a cash flow hedge that is determined to be an effective hedge.

Currency revaluation reserve

The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of the

foreign subsidiary.

24.Financial instruments(a) Financial risk management objectives and policies

The Group’s principal financial instruments, other than derivatives, comprise bank loans and an overdraft, cash and short-term deposits.

The main purpose of these financial instruments is to raise finance for the Group’s operations. The Group has various other financial assets

and liabilities such as trade receivables and trade payables, which arise directly from its operations. The Group also enters into derivative

transactions, principally interest rate swaps. The purpose is to manage the interest rate risk arising from the Group’s operations and its sources

of finance.

It is, and has been throughout the period under review, the Group’s policy that no trading in financial instruments shall be undertaken.

The main risk arising from the Group’s financial instruments are cash flow interest rate risk, liquidity risk, foreign currency risk and credit risk.

The Board reviews and agrees policies for managing each of these risks and they are summarised below and in the directors’ report.

Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the

basis on which income and expenses are recognised, in respect of each class of financial assets, financial liability and equity instruments are

disclosed in Note 2 to the financial statements.

(b) Interest rate riskThe Group’s exposure to changes in market interest rates relates primarily to the Group’s long-term debt obligations with a floating interest

rate.

The Group’s policy is to manage its interest cost using fixed rate debt. Floating interest contracts are aligned to matching swap contracts to

hedge against fluctuations in interest rate movements.

Interest rate swaps, denominated in Australian dollars and New Zealand dollars, have been entered into as cash flow hedges of medium-term

notes and long-term notes. The swaps have maturities ranging from one to nine years, following the maturity of the related notes and have

swap rates ranging from 6.36% to 8.39%. At 30 June 2007, the Group had interest rate swaps with a notional contract amount of

$130.7 million (2006: $122.3 million).

The net fair value of swaps at 30 June 2007 was $2.293 million (2006: ($1.760 million)).

Notes to the financial statements (continued)F

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24. Financial instruments (continued)(b) Interest rate risk (continued)

Weightedaverage

effectiveYear ended 30 June 2007 <1 >1-<2 >2-<3 >3-<4 >4-<5 >5 interest

year years years years years years Total rateConsolidated $’000 $’000 $’000 $’000 $’000 $’000 $’000 %

Financial assetsCash and cash equivalents 6,158 – – – – – 6,158 5.60%

Weighted average effectiveinterest rate 5.60% – – – – –Derivative financial instruments 21 675 – 154 157 1,286 2,293

Other financial assets – 397 – – – – 397 10.75%

Weighted average effectiveinterest rate – 10.75% – – – –

Financial liabilitiesBank bills with interestrate swaps 217 81,974 – 9,469 6,040 32,063 129,763 7.69%

Weighted averageeffective interest rate 6.59% 7.82% – 7.24% 7.96% 7.48%Bank bills – – 4,630 – – – 4,630 7.74%

Weighted average effectiveinterest rate – – 7.74% – – –PICE units – – – – – – – –

Weighted averageeffective interest rate – – – – – – – –

Weightedaverage

effectiveYear ended 30 June 2007 <1 >1-<2 >2-<3 >3-<4 >4-<5 >5 interest

year years years years years years Total rateParent $’000 $’000 $’000 $’000 $’000 $’000 $’000 %

Financial assetsCash and cash equivalents 1,367 – – – – – 1,367 5.60%

Weighted average effectiveinterest rate 5.60% – – – – –Derivative financial instruments 21 (153) – 19 157 522 566

Other financial assets – 397 – – – – 397 10.75%

Weighted average effectiveinterest rate – 10.75% – – – –

Financial liabilitiesBank bills with interestrate swaps 340 13,747 – 8,163 1,400 13,740 37,390 7.64%

Weighted average effectiveinterest rate 6.59% 8.55% – 7.16% 6.78% 7.13%Bank bills – – 4,630 – – – 4,630 7.74%

Weighted average effectiveinterest rate – – 7.74% – – – – –PICE units – – – – – – – –

Weighted average effectiveinterest rate – – – – – – – –

Notes to the financial statements (continued)F

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24. Financial instruments (continued)(b) Interest rate risk (continued)

Weightedaverage

effectiveYear ended 30 June 2006 <1 >1-<2 >2-<3 >3-<4 >4-<5 >5 interest

year years years years years years Total rateConsolidated $’000 $’000 $’000 $’000 $’000 $’000 $’000 %

Financial assetsCash and cash equivalents 3,991 – – – – – 3,991 4.31%

Weighted average effectiveinterest rate 4.31% – – – – –Other financial assets 600 – 397 – – – 997 8.79%

Weighted average effectiveinterest rate 7.50% – 10.75% – – –

Financial liabilitiesBank bills with interestrate swaps 1,535 – 78,301 – 9,426 32,746 122,008 7.53%

Weighted average effectiveinterest rate 6.80% – 7.58% – 7.21% 7.55%Bank bills 1,925 – – 4,710 – 492 7,127 7.52%

Weighted average effectiveinterest rate 6.76% – – 7.74% – 8.38%PICE units – – – – 13,625 – 13,625 10.10%

Weighted average effectiveinterest rate – – – – 10.10% – – –Derivative financial instruments 1 – 1,358 – 183 218 1,760 –

Weightedaverage

effectiveYear ended 30 June 2006 <1 >1-<2 >2-<3 >3-<4 >4-<5 >5 interest

year years years years years years Total rateParent $’000 $’000 $’000 $’000 $’000 $’000 $’000 %

Financial assetsCash and cash equivalents 2,983 – – – – – 2,983 4.31%

Weighted average effectiveinterest rate 4.31% – – – – –Other financial assets 600 – 397 – – – 997 8.79%

Weighted average effectiveinterest rate 7.50% – 10.75% – – –

Financial liabilitiesBank bills with interestrate swaps 1,754 – 13,993 – 8,375 13,002 37,124 7.65%

Weighted average effectiveinterest rate 6.80% – 8.55% – 7.16% 7.11%Bank bills 1,925 – – 4,710 – – 6,635 7.46%

Weighted average effectiveinterest rate 6.76% – – 7.74% – –PICE units – – – – 13,625 – 13,625 10.10%

Weighted average effectiveinterest rate – – – – 10.10% – – –Derivative financial instruments 1 – 487 – 79 66 633 –

Notes to the financial statements (continued)F

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24.Financial instruments (continued)(c) Foreign currency risk

The Group has transactional currency exposure. Such exposure arises from bank interest paid by an operating unit in a currency other

than the unit’s functional currency.

(d) Credit riskThe economic entity’s maximum exposure to credit risk at balance date in relation to each class of recognised financial asset is

the carrying amount of those assets as indicated in the balance sheet. Credit reviews of all vineyard lessees are

completed prior to the acquisition of any vineyard property and there is an ongoing review process during the terms of the leases.

In addition, receivable balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debts is not significant.

(e) Liquidity riskThe Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank loans and bank overdrafts.

(f) Fair valuesThe carrying amount of the financial assets and financial liabilities recorded in the balance sheet approximates the respective net fair values,

determined in accordance with the accounting policies disclosed in Note 2 to the financial statements.

25. Auditor’s remunerationThe auditor of Challenger Wine Trust is Ernst & Young.

Consolidated Consolidated Parent Parent

Restated Restated30 June 2007 30 June 2006 30 June 2007 30 June 2006

$’000 $’000 $’000 $’000

Amounts received or due and receivableby Ernst & Young for:

An audit or review of the financial report of theentity and any other entity in the consolidated group 69 46 69 46

Other services in relation to the entity and anyother entity in the consolidated group:

Compliance plan audit – 7 – 7

Other 15 28 15 28

84 81 84 81

26.Related party disclosure(a) Related party entities

The consolidated financial statements include the financial statements of Challenger Wine Trust and the subsidiaries listed in the following table.

Name Country of % of equity interest Investment ($’000)incorporation 2007 2006 2007 2006

Delegat’s Trust New Zealand 100 100 11,793 11,793

Southcorp Trust Australia 100 100 500 500

McGuigan Simeon Trust Australia 100 100 8,400 8,400

20,693 20,693

(b) Responsible EntityThe Responsible Entity of CWT is Challenger Listed Investment Limited (CLIL), a wholly owned subsidiary of Challenger Life Holdings Pty Limited.

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26.Related party disclosure (continued)(c) Details of Key Management Personnel

(i) Directors

The directors of CLIL, the Responsible Entity of CWT, are considered to be Key Management Personnel.

• Stephen Gerlach Chairman

• Peter Brook (appointed 6 November 2006)

• Russell Hooper

• Ian Martens

• Greg Martin (resigned 4 August 2006)

• Geoff McWilliam

• Ian Moore

• Peter Polson (resigned 4 August 2006)

• Paul Rogan (resigned 2 November 2006)

• Robert Woods

During the year ended 30 June 2007, directors were paid $639,150 in respect of their directorship of the Responsible Entity.

This amount includes all fees paid to the directors of CLIL in respect of their Responsible Entity Board and committee duties

for all trusts, including this trust.

(ii) Key Management Personnel

In addition to the directors noted above, the following were considered Key Management Personnel during the period with

the authority for the strategic direction and management of the Challenger Wine Trust:

• Bevan Towning (Head of Specialised Funds)

• Nick Gill (Fund Manager, CWT)

• CLIL (Responsible Entity, CWT)

(iii) Compensation of the Key Management Personnel of CWT

No amounts are paid by CWT directly to the Key Management Personnel individuals of the Trust.

CLIL, as the Responsible Entity of CWT, is deemed to be the Key Management Personnel of CWT. Compensation paid directly

to CLIL in the form of fees is disclosed in Note 26(g).

(d) Management feesThe Responsible Entity is entitled under the Constitution to be reimbursed for certain expenses incurred in administering the Trust.

The basis on which the expenses are reimbursed is defined in the Constitution.

(i) Management fees policy applicable up to 31 December 2005

In accordance with the Constitution, the Responsible Entity was entitled to a fee up to 0.75% per annum of the total asset

value of the Trust, assessed at the end of each month.

The Responsible Entity was entitled to receive up to 2% per annum of the properties’ annual gross income for managing

the vineyards, payable monthly. The Responsible Entity may also have been entitled to additional fees for providing additional

services to the Trust.

Notes to the financial statements (continued)F

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26.Related party disclosure (continued)(d) Management fees (continued)

(ii) Management fees policy applicable after 1 January 2006

In accordance with changes to the Constitution, the Responsible Entity is entitled to a fee up to 0.65% per annum of the total asset

value of the Trust and 1.5% on capital acquisitions, assessed at the end of each month.

The Responsible Entity is entitled to receive up to 1% per annum of the properties’ annual gross income for managing the vineyards, payable

monthly. The Responsible Entity may also be entitled to additional fees for providing additional services to the Trust.

Expenses are recognised on an accruals basis as they are incurred.

On 31 January 2006, the Responsible Entity delegated certain of its management activities to Challenger Management Services Limited

(CMSL) as is permitted following changes to the Constitution.

(e) CustodianThe Custodian is Australian Executor Trustees Limited (formerly known as Tower Trust (SA)).

(f) Wholly owned group transactionsAll transactions with related parties have been conducted at terms not more favourable than arm’s length.

(g) Related party transactionsThe attached table discloses all fees paid by CWT to CLIL and Challenger Management Services Limited (CMSL) under the Trust Constitution

and to CMSL under the management agreement with CLIL:

Consolidated Consolidated

Restated30 June 2007 30 June 2006

$’000 $’000

(a) Responsible Entity fees for the financial year paid to CLIL in accordancewith the Scheme Constitution 300 1,524

(b) Management fees for the financial year paid to CMSL under theManagement Agreement 2,045 1,057

Total fees paid or payable at balance date 2,345 2,582

Of the above fees $71,216 (2006: $161,197) has been capitalised to property acquisitions and developments.

(h) Convertible notesDelegat’s Trust and Southcorp Trust have issued convertible notes to Challenger Wine Trust. The convertible notes are issued in

consideration for funds advanced by CWT. The convertible notes may be redeemed at 30 days’ notice or converted to ordinary units

on each anniversary of the issue of the notes.

Notes to the financial statements (continued)F

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26. Related party disclosure (continued)(i) Interests in the shares and options of the company and related bodies corporate

As at the balance date, the following related parties held the following interests in CWT:

Ordinary Ordinary PICE PICEunits units units units

fully paid fully paid fully paid fully paid

30 June 2007 30 June 2006 30 June 2007 30 June 2006

No. of units No. of units No. of units No. of units

Related entities

Challenger Life No.2 Limited 44,626,652 36,251,019 – 783,052

CLIL directors

S Gerlach 151,600 151,600 – –

IM Martens 256,148 152,123 – 200

G McWilliam 100,000 – – –

R Woods 233,812 105,656 – 10,530

Key Management Personnel

B Towning 215,085 – – –

Total 45,583,297 36,760,398 – 793,782

27. Commitments and contingenciesOperating lease commitments – group as lessorThe Group has entered into commercial property leases on its investment property portfolio.

These non-cancellable leases have remaining terms between one and nine years. The rates are based on predetermined formulae in each lease.

Future minimum rentals receivable under non-cancellable operating leases as at 30 June are as follows:

Consolidated Consolidated Parent Parent

Restated Restated30 June 2007 30 June 2006 30 June 2007 30 June 2006

$’000 $’000 $’000 $’000

Within one year 29,365 29,016 9,581 10,031

After one year but not more than five years 105,810 113,546 27,012 32,923

More than five years 51,234 72,862 5,204 8,874

186,409 215,424 41,797 51,828

The 30 June 2006 operating lease commitments have been restated to exclude any lessee options which were assumed to be exercised

in the previous 30 June 2006 balances.

Notes to the financial statements (continued)F

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27. Commitments and contingencies (continued)Capital expenditure commitmentsFinance facilities which total $4,472,440 (2006: $30,394,142) have been made available to the Group for further development of various

vineyards. These commitments will be secured by the Group and the Group will earn lease rentals on these developments at rates based

on predetermined formulae in each lease.

Consolidated Consolidated Parent Parent

Restated Restated30 June 2007 30 June 2006 30 June 2007 30 June 2006

$’000 $’000 $’000 $’000

Investment property

Within one year 4,472 12,250 4,385 8,358

After one year but not more than five years – 18,144 – 14,875

More than five years – – – –

4,472 30,394 4,385 23,233

28. Events after the balance sheet dateOn 30 June 2007, CWT signed two conditional agreements with companies controlled by the Grant Burge family to purchase the Filsell, Miamba,

Cameron Vale and Chaff Mill Vineyards for $11.5 million plus acquisition costs. The properties would be leased to Grant Burge Wines Pty Ltd for

eight years, with three options to extend for a further four years each. On 17 August 2007 settlement was reached on the purchase of these

properties.

On 21 August 2007, the Board of Evans and Tate Limited announced the appointment of an Administrator. Subsequently the ANZ Banking Group

as secured creditor appointed a Receiver and Manager, that day. Evans and Tate Limited is a tenant at CWT’s Cocoparra, Woods and Gnangara

Vineyards. For the year ended 30 June 2007, they paid rental income of $1.7 million to CWT, equivalent to 5.8% of net property income. Rental

on all three properties has been paid up until 31 July 2007 in accordance with existing lease terms. CWT management are currently reviewing

possible options in regards to these properties and leases.

Notes to the financial statements (continued)F

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On the financial report of the Challenger Wine TrustIn accordance with a resolution of the Directors of Challenger Listed Investments Limited (the Responsible Entity of the Challenger Wine

Trust (herein known by its ASX code ‘CWT’)), I state that:

1. In the opinion of the directors:

(a) The financial statements and notes of CWT are in accordance with the Trust Constitution and the Corporations Act 2001, including:

(i) giving a true and fair view of CWT as at 30 June 2007 and of its performance for the period ended on that date; and

(ii) complying with Accounting Standards and Corporations Regulations 2001; and

(b) There are reasonable grounds to believe that CWT will be able to pay its debts as and when they become due and payable.

2. This declaration has been made after receiving the declarations required to be made to the directors in accordance with section 295A

of the Corporations Act 2001 for the financial period ended 30 June 2007.

On behalf of the Board

Russell Hooper

Director

Sydney

22 August 2007

statement by the directors of the Responsible Entity of CWTF

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Liability limited by a scheme approved underProfessional Standards Legislation.

Independent auditor’s report to the unitholders of Challenger Wine Trust

We have audited the accompanying financial report of the Challenger Wine Trust (the Trust) and

the entities it controlled during the year, which comprises the balance sheet as at 30 June 2007, and

the income statement, statement of changes in equity and cash flow statement for the year ended

on that date, a summary of significant accounting policies, other explanatory notes and the

directors’ declaration.

Directors’ Responsibility for the Financial Report

The directors of the Responsible Entity are responsible for the preparation and fair presentation of

the financial report in accordance with the Australian Accounting Standards (including the

Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility

includes establishing and maintaining internal controls relevant to the preparation and fair

presentation of the financial report that is free from material misstatement, whether due to fraud or

error; selecting and applying appropriate accounting policies; and making accounting estimates

that are reasonable in the circumstances. In Note 2(b), the directors also state that the financial

report, comprising the consolidated financial statements and notes, comply with International

Financial Reporting Standards.

Auditor’s Responsibility

Our responsibility is to express an opinion on the financial report based on our audit. We

conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards

require that we comply with relevant ethical requirements relating to audit engagements and plan

and perform the audit to obtain reasonable assurance whether the financial report is free from

material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and

disclosures in the financial report. The procedures selected depend on our judgment, including the

assessment of the risks of material misstatement of the financial report, whether due to fraud or

error. In making those risk assessments, we consider internal controls relevant to the entity’s

preparation and fair presentation of the financial report in order to design audit procedures that are

appropriate in the circumstances, but not for the purpose of expressing an opinion on the

effectiveness of the entity’s internal controls. An audit also includes evaluating the appropriateness

of accounting policies used and the reasonableness of accounting estimates made by the directors

of the Responsible Entity, as well as evaluating the overall presentation of the financial report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a

basis for our audit opinion.

2007

Independent review report to members of CWTF

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Independence

In conducting our audit we have met the independence requirements of the Corporations Act 2001.

We have given to the directors of the Responsible Entity a written Auditor’s Independence

Declaration, a copy of which is included in the directors’ report. In addition to our audit of the

financial report, we were engaged to undertake the services disclosed in the notes to the financial

statements. The provision of these services has not impaired our independence.

Auditor’s Opinion

In our opinion:

the financial report of the Challenger Wine Trust is in accordance with:

(a) the Corporations Act 2001, including:

(i) giving a true and fair view of the financial position of the Challenger Wine Trust

and the consolidated entity at 30 June 2007 and of their performance for the year

ended on that date; and

(ii) complying with Australian Accounting Standards (including the Australian

Accounting Interpretations); and

(b) other mandatory financial reporting requirements in Australia.

Ernst & Young

Graeme McKenzie

Partner

Sydney

22 August 2007

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ASX listingChallenger Wine Trust (CWT) is listed on

the Australian Securities Exchange (ASX).

The Trust’s units trade under the code ‘CWT’.

Unit prices are published daily in major

Australian metropolitan newspapers, and

are also accessible from the CWT website.

The CWT websiteThe CWT website

www.challenger.com.au/cwt contains

important information about the Trust,

including unit prices, announcements, annual

reports and an overview of each property in

the CWT portfolio.

Unitholder enquiriesIf you have queries relating to your

unitholding or wish to provide a change

of address, Tax File Number, instructions for

payment of distributions or annual report

elections please contact the Unit Registry

as follows:

Challenger Wine Trust

C/– Computershare Investor Services Pty Ltd

Level 5, 115 Grenfell Street

ADELAIDE SA 5000

Telephone: 1300 556 161

Facsimile: +61 8 8236 2305

Email:

[email protected]

Website: www.computershare.com

If you have any questions relating to the

management of the Trust, please contact

Challenger on +61 2 9994 7000, or send

an email to [email protected].

DistributionsCWT pays distributions quarterly for the

periods ending 31 March, 30 June,

30 September and 31 December. Distributions

are typically paid to unitholders six weeks

after quarter end. Distribution payments can

be paid by:

• direct credit to a nominated Australian

financial institution account; or

• a cheque mailed to your registered

unitholding address.

Annual taxation statementsThe taxable income shown on your Annual

Taxation Statement is taxable in the year of

entitlement rather than the year of receipt.

This means that taxable income included in

distributions paid in October 2006, February

2007, May 2007 and August 2007 is

assessable in the taxation year ended

30 June 2007.

An Annual Taxation Statement is sent

to unitholders in August each year. This

statement includes important taxation

information and should be retained by

unitholders to assist in the completion

of their taxation return.

Unitholder complaintsIf you are dissatisfied with a service or process

relating to your investment, please let us

know. There is no charge to make a

complaint. Complaints can be made either

verbally or in writing by contacting:

Complaints Manager

Challenger Wine Trust

C/– Computershare Investor Services Pty Ltd

Level 5, 115 Grenfell Street

ADELAIDE SA 5000

Telephone: 1300 556 161

Facsimile: +61 8 8236 2305

Email:

[email protected]

Website: www.computershare.com

The Responsible Entity has a documented

internal dispute and resolution policy in line

with the Australian Standard for Complaint

Handling ISO 10002_2004.

If you are not happy with how the complaint

has been handled, you may contact the

Financial Industry Complaints Service (FICS),

of which the Responsible Entity is a member.

This is an independent body and is approved

by ASIC to consider complaints. The contact

details for FICS are:

Financial Industry Complaints Service

PO Box 579

Collins Street West

Melbourne VIC 8007

Tel: 1300 780 808

www.fics.asn.au

Unitholderinformation

2007

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2007Substantial unitholdings as at 31 August 2007

Effective Number % issued Company name date of units capital

Challenger Financial Services Group Limited 27-3-2006 28,237,885 (ordinary) 27.267,673,909 (PICE)

Commonwealth Bank Group 7-5-2007 14,055,189 8.25UBS Nominees Pty Ltd 12-1-2007 11,408,184 7.45SG Hiscock & Company 20-2-2007 9,986,572 6.52DLIBJ Asset Management Co. Ltd 10-5-2007 10,837,674 6.36

Top 20 unitholders as at 31 August 2007Number % issued

Number Name of units capital

1 J P Morgan Nominees Australia Limited 47,147,734 27.68

2 HSBC Custody Nominees (Australia) Limited 17,031,548 10.00

3 National Nominees Limited 13,348,074 7.84

4 Mr Alan Segel – Segel Partnership II LP A/C 4,603,400 2.70

5 Citicorp Nominees Pty Limited 4,438,786 2.61

6 Crownace Pty Ltd 3,750,000 2.20

7 Invia Custodian Pty Limited 2,704,850 1.59

8 Cogent Nominees Pty Limited 2,455,980 1.44

9 ANZ Nominees Limited 1,157,594 0.68

10 Ago Pty Ltd Superannuation Fund A/C 1,050,152 0.62

11 Paticoa Nominees Pty Ltd 935,000 0.55

12 Sandhurst Trustees Ltd 874,459 0.51

13 Brispot Nominees Pty Ltd <House Head Nominee No 1 A/C> 863,758 0.51

14 RBC Global Services Australia Nominees Pty Ltd 821,851 0.48

15 Mr Malcolm Eric Gordon 745,407 0.44

16 Miss Samantha Orgill 660,180 0.39

17 Netwealth Investments Limited Super Services A/C 638,728 0.38

18 Mrs Julie Ann Orgill 536,000 0.31

19 Cherryoak Investments Pty LTD C & N Family A/C 500,000 0.2920 Australian Executor Trustees Limited No 1 Account 466,704 0.27

Total 104,730,205 61.49

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Spread of unitholders as at 31 August 2007Number of Number of % issued

Holding unitholders units fully paid capital

1 – 1,000 148 65,477 0.04

1,001 – 5,000 605 2,039,892 1.20

5,001 – 10,000 744 5,921,657 3.48

10,001 – 100,000 1,677 45,700,793 26.83

100,001 – 9,999,999,999 95 116,584,814 68.45

Total 3,269 170,312,633 100.00

At 31 August 2007 there were 100 unitholders each holding less than a marketable parcel of 637 ordinary units.

Voting rightsOn a show of hands, each member of CWT, being a holder of ordinary units (Member) has one vote.

On a poll, each Member has one vote for each dollar of the value of the total units in CWT held by that Member.

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Challenger Listed Investments Limited(ABN 94 055 293 644) (AFSL 236887) (CLIL) isthe Responsible Entity of Challenger Wine Trust(ARSN 092 960 060) (CWT).

CLIL, as the Responsible Entity of CWT, has preparedthis Annual Report (Report) based on informationavailable to it. The information in this Report shouldbe regarded as general information only. Nothingcontained in this Report constitutes investment,legal, tax or other advice. It has been preparedwithout taking account of any person’s objectives,financial situation or needs. Recipients should,before acting on any such information, consider itsappropriateness, having regard to their objectives,financial situation and needs, and seek the assistanceof their financial or other licensed professionaladviser before making any investment decision.

Any investment in CWT is subject to investment riskand other risks, including possible loss of incomeand principal invested. None of CLIL, ChallengerManagement Services Limited (ABN 29 092 382 842)(AFSL 234678) (CMSL), Challenger Financial ServicesGroup Limited (ABN 85 106 842 371) (Challenger) or any other member of the Challenger Group givesany guarantee or assurance as to the performance of CWT or the repayment of capital.

Nothing in this Report should be considered asolicitation, offer or invitation to buy, subscribe for orsell any, or a recommendation of, financial products.

All reasonable care has been taken to ensure thatthe facts stated and opinions given in this Report are fair and accurate. To the maximum extentpermitted by law, the recipient releases CLIL, eachmember of the Challenger Group, their directors,officers, employees, representatives and advisersfrom any liability (including, without limitation, inrespect of direct, indirect or consequential loss ordamage or loss or damage arising by negligence)arising in relation to any recipient relying onanything contained in or omitted from this Report.

Challenger Wine Trust (CWT)ARSN 092 960 060

Australian Securities Exchange (ASX) codeCWT

Responsible EntityChallenger Listed Investments LimitedABN 94 055 293 644AFSL 236887

Directors of the Responsible EntityS Gerlach (Chairman)RRR HooperIM MartensGK McWilliamIR MooreRJ WoodsPR Brook

Company SecretaryC RobsonS Koeppenkastrop

ManagerChallenger Management Services LimitedABN 29 092 382 842

AddressLevel 15255 Pitt StreetSydney NSW 2000Telephone: +61 2 9994 7000Facsimile: +61 2 9994 7777Email: [email protected]: www.challenger.com.au/cwt

RegistryComputershare Investor Services Pty LtdLevel 5, 115 Grenfell StreetADELAIDE SA 5000Telephone: 1300 556 161Facsimile: +61 8 8236 2305Email: [email protected]: www.computershare.com

Any forward looking statements included in thisReport involve subjective judgement and analysisand are subject to significant uncertainties, risks andcontingencies, many of which are outside the controlof, and are unknown to, CLIL. In particular, theyspeak only as of the date of these materials, theyassume the success of CWT’s business strategies,and they are subject to significant regulatory,business, competitive and economic uncertaintiesand risks. Actual future events may vary materiallyfrom forward looking statements and assumptionson which those statements are based. Given theseuncertainties, recipients are cautioned not to placeundue reliance on such forward looking statements.

Any past performance information provided in thisReport is not a reliable indication of future performance.

CLIL does not receive any specific remuneration forany general advice which may be provided to you inthis Report. However, CLIL and CMSL receive trusteeand management fees as Responsible Entity andManager of CWT, respectively. For more details onfees, please refer to the Financial Report containedin this Report and additional information on theAustralian Securities Exchange (ASX) websitewww.asx.com.au. Financial advisers (including someChallenger Group companies) may receive fees orcommissions if they provide advice to you or arrangefor you to invest in a Challenger product (includingCWT). CLIL and its associates may have an interestin the financial products referred to in this Reportand may earn fees or other benefits as a result oftransactions in any such financial products.

Members of the Challenger Group and their officersand directors may hold securities in CWT from timeto time.

Important notice Directory

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Investments. Mortgages. Possibilities.

Challenger Wine TrustAnnual Report 2007

Challenger Wine Trust(ARSN 092 960 060)

Responsible EntityChallenger Listed Investments Limited(ABN 94 055 293 644)(AFSL 236887)

Challenger W

ine Trust

Level 15255 Pitt StreetSydney NSW 2000telephone 02 9994 7000facsimile 02 9994 7777

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