Appendix 4D - Results for announcement to the market ... · Distribution (cents per unit) Record...

Appendix 4D - Results for announcement to the market

Interim result for the period ended 31 December 2011

Challenger Infrastructure Fund comprising

CIF Investment Trust 1 ARSN 114 139 703 and

CIF Investment Trust 2 ARSN 114 139 632

2.1/2.2/2.3 Revenue and profit from ordinary activities and net profit for the period attributable to members:

Half year ended

31 December 2011

($’000)

Half year ended

31 December 2010

($’000)

Change

($’000)

Change1

%

2.1 Revenue from ordinary activities 178,399 178,769 (370) (0.2)% 2.2 Profit (loss) from ordinary activities after tax 2 4,388 3,758 630 16.8% 2.3 Net profit (loss) attributable to members (112,197) 9,157 (121,354) -

1 Percentage change has not been provided when the current period consists of a net loss 2 Excludes fair value movements

2.4/2.5 Amounts per security of all distributions paid during the period:

Distribution

(cents per unit)

Record date Payment date

Interim distribution 5.0 31 December 2011 29 February 2012

2.6 Explanation of figures in 2.1 to 2.4

For an explanation of the above result refer to the following attached documents:

• Interim results market release

• Interim financial report

3.0 The net tangible assets for CIF for the period ended are:

31 December 2011 $ per security

30 June 2011 $ per security

Change %

Net asset backing per security 0.74 1.28 (42.2)%

Net tangible asset backing per security (2.20) (1.68) 30.2%

Net tangible asset backing per security (excluding deferred taxes) (1.69) (1.19) 42.0%

4.0 No control has been gained or lost over another entity during the year.

5.0 Details of distribution:

Distribution

(cents per unit)

Payment date Total distribution

($’000)

Interim distribution 5.0 29 February 2012 15,811

6.0 No distribution reinvestment plan was in operation for the period

7.0 No associates or joint venture transactions were entered into during the period

8.0 Not applicable

9.0 Not applicable

23 February 2012

Suzie Koeppenkastrop Date Company Secretary

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Chal lenger In frast ructure Fund In ter im F inancial Report For the half year ended 31 December 2011

Responsible Entity – Challenger Listed Investments Limited ABN 94 055 293 644

Challenger Infrastructure Fund

Comprising the stapled securities: CIF Investment Trust 1 (ARSN 114139703) CIF Investment Trust 2 (ARSN 114139632)

and

Challenger Infrastructure Trust Group

and its controlled entities

Interim Financial Report

For the half year ended 31 December 2011

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Chal lenger In frastructure Fund In ter im Financia l Report For the half year ended 31 December 2011

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Table of Contents

Directors’ report ....................................................................................................................................... 3�

Auditor’s Independence Declaration ....................................................................................................... 6�

Consolidated income statement .............................................................................................................. 7�

Consolidated statement of comprehensive income ................................................................................ 8�

Consolidated balance sheet .................................................................................................................... 9�

Consolidated statement of changes in equity ....................................................................................... 10�

Consolidated statement of cash flows ................................................................................................... 11�

Notes to the financial statements .......................................................................................................... 12�

1. Corporate information ................................................................................................................................. 12�2. Summary of accounting policies ................................................................................................................. 12�3. Expenses ................................................................................................................................................... 15�4. Realised and unrealised gains (losses) ...................................................................................................... 15�5. Financing costs .......................................................................................................................................... 16�6. Trade and other receivables ....................................................................................................................... 16�7. Property plant and equipment .................................................................................................................... 16�8. Intangible assets ........................................................................................................................................ 17�9. Impairment testing ...................................................................................................................................... 17�10. Trade and other payables .......................................................................................................................... 17�11. Interest bearing liabilities ............................................................................................................................ 18�12. Derivative financial instruments .................................................................................................................. 20�13. Contributed equity ...................................................................................................................................... 21�14. Reserves .................................................................................................................................................... 21�15. Segment information .................................................................................................................................. 22�16. Events subsequent to balance date ........................................................................................................... 24�17. Contingencies............................................................................................................................................. 24�

Statement by the Directors of the Responsible Entity of CIF ................................................................ 25�

Independent review report to the securityholders of CIF ...................................................................... 26�

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Directors’ report

The Directors of Challenger Listed Investments Limited (CLIL) (ABN 94 055 293 644), the Responsible Entity of the CIF Investment Trust 1 (ARSN 114 139 703) (CIF1) and CIF Investment Trust 2 (ARSN 114 139 632) (CIF2), collectively known as the Challenger Infrastructure Fund (CIF), submit their report together with the financial reports for CIF1 and CIF2, for the half year ended 31 December 2011. CIF Investment Trust 2 and its controlled entities are presented as the Challenger Infrastructure Trust Group. Principal activity

The principal activity of CIF during the period was the investment of funds in a portfolio of global infrastructure assets. Scheme information

CIF consists of two stapled Australian registered managed investment schemes: CIF1 and CIF2. Units are stapled together so that one cannot be transferred, or otherwise dealt with, without the other. The consolidated balance sheet and consolidated income statement comprise the financial position and performance of CIF1 and its controlled entities, and CIF2 and its controlled entities, collectively known as CIF. For the purposes of this report, ‘Challenger Infrastructure Fund’ represents CIF1 and its controlled entities and ‘Challenger Infrastructure Trust Group’ represents CIF2 and its controlled entities. CLIL, the Responsible Entity of CIF, 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

The following persons held office as Directors of CLIL during the period and up to the date of this report:

• Michael Cole - Chair

• Ian Martens

• Geoff McWilliam

• Ian Moore

• Brendan O’Connor

• Robert Woods Review and results of operations

Earnings before interest expense, taxation, depreciation, amortisation (EBITDA) and fair value movements and net profit after tax are the Directors’ key focus when analysing the fund and its segments’ performance. EBITDA before fair value movements for the half year ended 31 December 2011 was $86.3m (2010: $89.6m profit). LBC and Inexus’ continue to grow revenue and EBITDA despite the difficult macro-economic environment. LBC is one of the world’s largest independent operators of bulk liquid storage terminals for chemical and petroleum products based in Europe, the USA and Asia. Revenues for LBC remained strong in underlying currencies. The growth in underlying EBITDA for HY12 demonstrates the continued strong demand for bulk liquid storage in key ports. Inexus is one of the largest owners and originator of utility networks in the UK and maintained impressive growth in revenue and underlying EBITDA. Income streams are regulated and indexed to inflation. Inexus currently owns 635,143 utility connections in the UK including 12,573 new connections from the rollout of the order book during the half year. Fund level EBITDA was also negatively impacted by the appreciation of the Australian dollar.

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The consolidated loss after tax attributable to securityholders of Challenger Infrastructure Fund for the half year ended 31 December 2011 was $112.2m (2010: $9.2m profit). The consolidated loss after tax attributable to securityholders of Challenger Infrastructure Trust Group for the half year ended 31 December 2011 was $115.5 million (2010: $13.0 million profit). Statutory loss after tax attributable to securityholders of Challenger Infrastructure Fund has been adversely impacted by unrealised movements in the Inexus swaps due to a reduction in nominal and real interest rates in the United Kingdom. CIF Fund has $154.4m cash at half year end, which has been retained for the interim distribution ($15.8m) and maximum financial flexibility. The following table provides an analysis of the result:

Challenger Infrastructure Fund Inexus LBC Fund TOTAL

Half year ended 31 December 2011 $’000 $’000 $’000 $’000

Revenue

Interest income 2 136 4,153 4,291 Revenue from external customers 50,181 123,927 - 174,108 Total revenue from external customers 50,183 124,063 4,153 178,399 Total segment revenue 50,183 124,063 4,153 178,399 Operating expenses and cost of sales (14,227) (73,567) (4,285) (92,079)

Earnings before interest, taxation, depreciation, amortisation and fair value movements 35,956 50,496 (132) 86,320

Depreciation and amortisation (7,409) (22,589) - (29,998)Financing costs (33,410) (21,086) (54,496)Total unrealised and realised gains/(losses) (135,407) (1,597) (1,136) (138,140)Profit (loss) before tax (140,270) 5,224 (1,268) (136,314)Income tax benefit (expense) 439 2,157 (34) 2,562 Profit (loss) after tax (139,831) 7,381 (1,302) (133,752)Profit (loss) after tax attributable to CIF securityholders (112,197)Distributions to securityholders 15,811

Interim distribution (cents per security) 5.0 For comparative segment information refer to Note 15. Capital management

The CIF1 consolidated current net asset deficiency at 31 December 2011 of $1,007m (CIF2: $1,173m) is primarily due to the Inexus debt which matures on 31 August 2012, as well as associated interest rate swaps. The Inexus Group Limited audited financial statements for the year ended 30 June 2011 were signed on 21 December 2011 and EY UK provided an unqualified audit opinion with an emphasis of matter relating to the debt refinance due in August 2012 and the belief of the Inexus Directors that the company is able to continue operations as a going concern.

We note that any debts of Inexus are non-recourse to LBC or CIF. Accordingly, any uncertainty that remains around the Inexus refinance does not impact on the ability of CIF to continue as a going concern. Inexus debt refinance

Inexus has debt facilities of £461m which mature on 31 August 2012, as well as associated interest rate swaps having an unrealised mark-to-market position including inflation accretion of £279m. Inexus has been in discussions with debt providers in readiness for the upcoming refinancing. A number of funders, including the majority of current syndicate banks, have expressed interest in providing Inexus with financing. Conditions in the European debt capital markets have continued to be difficult impacting the proposed finance package discussed with the banks. Nevertheless, CIF is confident a refinancing can be agreed, and has available cash reserves ($138.6m after the 31 December 2011 distribution) to support such a refinancing. The refinancing discussions will be progressed in tandem with the strategic review process.

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Significant changes in the state of affairs

Strategic Review The CLIL Board has appointed Rothschild and Challenger Management Services Limited (CMSL) to assist it with a review of the strategic options available to the Fund to maximise securityholder value. Phase one of this review has now been completed. The Board are currently considering a short list of options including: - individual asset sales; - narrowing the future investment mandate of the fund; and - sale of the fund. Distributions

On 16 December 2011 CIF announced an estimated interim distribution of 5.0 cents per security. On 23 February 2012, the directors resolved to pay an interim distribution of 5.0 cents per security (2010: 7.0 cents per security).

Significant events after the balance date

There has been no other matter or circumstance that has arisen since the end of the financial period that has significantly affected, or will affect, CIF’s operations in future financial years, the results of those operations or CIF’s state of affairs in future financial years. Likely developments and expected results

Further information on likely developments on the operation of CIF 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 CIF. Rounding of amounts in the Directors’ report and the financial report

CIF1 and CIF2 are registered schemes that are of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments Commission, 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 Declaration

We have obtained an independence declaration from our auditors, Ernst & Young as set out on page 6. This report is made in accordance with a resolution of directors of Challenger Listed Investments Limited.

Michael Cole Chair Sydney 23 February 2012

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I=f ERNST & YOUNG Ernst & Young Centre680 George StreetSydney NSW 2000 AustraliaGPO Box 2646 Sydney NSW 2001

Tel: +61 2 9248 5555Fax: +61 2 9248 5959www.ey.com/au

Auditor's Independence Declaration to the Directors of the ResponsibleEntity of Challenger Infrastructure Fund

In relation to our review of the financial report of the stapled securities CIF Investment Trust 1 and CIFInvestment Trust 2, collectively known as Challenger Infrastructure Fund (CIF), for the half-year ended 31December 2011, to the best of my knowledge and belief, there have been no contraventions of theauditor independence requirements of the Corporations Act 2001 or any applicable code of professionalconduct.

-Q-YR/k/\AT-Ernst & Young

Clare SporlePartnerSydney

23 February 2012

Liability limited by a scheme approvedunder Professional Standards Legislation

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Consolidated income statement


Challenger Infrastructure FundChallenger Infrastructure Trust

Group

31-Dec-11 31-Dec-10 31-Dec-11 31-Dec-10

Notes $’000 $’000 $’000 $’000

Interest income 4,291 5,640 245 211 Transportation revenue 0 50,181 51,900 50,181 51,900

Tank storage and related revenue 0 123,927 121,229 123,927 121,229

Total revenue 178,399 178,769 174,353 173,340

Cost of sales 0 (36,545) (35,362) (36,545) (35,362)Operating expenses 3 (55,534) (53,801) (52,265) (52,923)Total operating expenses (92,079) (89,163) (88,810) (88,285)

Earnings before interest expense, taxation, depreciation, amortisation and fair value movements 86,320 89,606 85,543 85,055

Depreciation and amortisation 3 (29,998) (30,612) (29,998) (30,612)Financing costs 5 (54,496) (47,820) (58,178) (51,512)Total depreciation, amortisation and financing costs (84,494) (78,432) (88,176) (82,124)

Realised gains (losses) 4 (335) (896) (314) (881)Unrealised gains (losses) 4 (137,805) 6,651 (136,691) 18,762 Total fair value movements 0 (138,140) 5,755 (137,005) 17,881

Profit (loss) before tax 0 (136,314) 16,929 (139,638) 20,812 Income tax benefit (expense) 2,562 (7,416) 2,562 (7,416)Profit (loss) after tax 0 (133,752) 9,513 (137,076) 13,396

Non-controlling interest (21,555) 356 (21,555) 356

Profit (loss) after tax attributable to CIF securityholders (112,197) 9,157 (115,521) 13,040 Profit (loss) after tax attributable to:

Securityholders of CIF1 3,324 (3,883) - - Securityholders of CIF2 - - (115,521) 13,040 Securityholders of CIF2 in CIF consolidated (115,521) 13,040 - -

(112,197) 9,157 (115,521) 13,040

Basic and diluted earnings (loss) per security (cents) – CIF1 1.0 (1.2) - -

Basic and diluted earnings (loss) per security (cents) – CIF2 - - (36.5) 4.1

Basic and diluted earnings (loss) per security (cents) – stapled (35.5) 2.9 - -

Diluted earnings (loss) per security (cents) – stapled 10 (35.5) 2.9 - -

The consolidated income statement should be read in conjunction with the accompanying notes.

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Consolidated statement of comprehensive income



Group

31-Dec-11 31-Dec-10 31-Dec-11 31-Dec-10

$’000 $’000 $’000 $’000

Profit (loss) after tax (133,752) 9,513 (137,076) 13,396

Other comprehensive incomeNet movement in foreign currency translation reserve (29,694) 4,336 (29,694) 4,336 Net movement in cash flow hedge reserve 10,683 10,542 10,683 10,542

Other comprehensive income for the year (net of tax) (19,011) 14,878 (19,011) 14,878 Total comprehensive income for the year (152,763) 24,391 (156,087) 28,274

Total comprehensive income attributable to:Securityholders of CIF1 3,324 (3,883) - - Securityholders of CIF2 - - (134,532) 19,017

Non-controlling interest:

Securityholders of CIF2 in CIF consolidated (134,532) 19,017 - - Non-controlling interest (21,555) 9,257 (21,555) 9,257

(152,763) 24,391 (156,087) 28,274

The consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.

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Consolidated balance sheet

As at 31 December 2011


Group

31-Dec-11 30-Jun-11 31-Dec-11 30-Jun-11

Notes $’000 $’000 $’000 $’000

Assets

CurrentCash and cash equivalents 196,783 204,400 45,277 29,459 Trade and other receivables 6 66,545 73,434 65,381 71,339 Inventory - work in progress 1,411 1,643 1,411 1,643

Derivative financial instruments at fair value 12 - 511 - 511

Current Assets 264,739 279,988 112,069 102,952

Non CurrentTrade and other receivables 6 2,496 3,067 2,496 3,067 Derivative financial instruments at fair value 12 - 177 - 177 Deferred tax assets 24,145 33,956 24,145 33,956 Property, plant and equipment 7 1,121,575 1,114,186 1,121,575 1,114,186 Intangible assets 8 930,977 942,902 930,977 942,902

Non current assets 2,079,193 2,094,288 2,079,193 2,094,288

Total assets 2,343,932 2,374,276 2,191,262 2,197,240

Liabilities

CurrentTrade and other payables 10 215,688 134,723 244,075 162,892 Distribution payable 15,811 22,136 - - Derivative financial instruments at fair value 12 347,325 24,820 347,325 24,820

Interest Bearing Liabilities 11 693,186 7,533 693,186 7,533

Current liabilities 1,272,010 189,212 1,284,586 195,245 Non CurrentTrade and other payables 10 - 78,029 - 78,029 Derivative financial instruments at fair value 12 417 198,064 417 198,064 Provisions 12,269 9,675 12,269 9,675 Interest Bearing Liabilities 11 604,069 1,260,915 1,246,934 1,898,444 Preference shares 11 35,822 41,427 35,822 41,427 Deferred tax liabilities 184,292 192,627 184,292 192,627

Non Current liabilities 836,869 1,780,737 1,479,734 2,418,266

Total liabilities 2,108,879 1,969,949 2,764,320 2,613,511

Net assets 235,053 404,327 (573,058) (416,271)

Equity 0Contributed equity 13 1,183,553 1,183,553 67 67 Retained profits (accumulated losses) (556,668) (440,689) (571,276) (451,973)Reserves 14 (464,572) (440,682) (74,589) (66,510)

Non-controlling interest 72,740 102,145 72,740 102,145

Total equity 235,053 404,327 (573,058) (416,271)

Comprised of :CIF1 808,111 820,598 - - CIF2 (645,798) (518,416) (645,798) (518,416)

Non-controlling interest 72,740 102,145 72,740 102,145

Total equity 235,053 404,327 (573,058) (416,271)

The consolidated balance sheet should be read in conjunction with the accompanying notes.

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Consolidated statement of changes in equity


Attributable to securityholders of Challenger Infrastructure Fund

Attributable to Non-controlling

Interest

Contributed equity

Reserves Retained profits TotalNon-controlling

InterestTotal Equity

$’000 $’000 $’000 $’000 $’000 $’000

Balance at 1 July 2010 1,186,541 (425,547) (439,881) 321,113 90,936 412,049 Profit (loss) after tax attributable to CIF securityholders - - 9,157 9,157 356 9,513 Other comprehensive income - 5,977 - 5,977 8,901 14,878 Total comprehensive income - 5,977 9,157 15,134 9,257 24,391

Transactions with owners in their capacity as ownersSecurities cancelled pursuant to share buy-back (2,982) - - (2,982) - (2,982)Transaction costs (6) - - (6) - (6)Distributions paid to securityholders - (22,136) - (22,136) - (22,136)Dividends to non controlling interests - - - - (1,149) (1,149)Balance at 31 December 2010 1,183,553 (441,706) (430,724) 311,123 99,044 410,167

Balance at 1 July 2011 1,183,553 (440,682) (440,689) 302,182 102,145 404,327 Profit (loss) after tax attributable to CIF securityholders - - (112,197) (112,197) (21,555) (133,752)Other comprehensive income - (8,079) - (8,079) (10,932) (19,011)Total comprehensive income - (8,079) (112,197) (120,276) (32,487) (152,763)

Transactions with owners in their capacity as ownersDistributions payable to securityholders - (15,811) - (15,811) - (15,811)Acquisition of Inexus non-controlling interests - - (3,782) (3,782) 3,782 - Dividends to non-controlling interests - - - - (700) (700)Balance at 31 December 2011 1,183,553 (464,572) (556,668) 162,313 72,740 235,053

Attributable to securityholders of Challenger Infrastructure Trust Group

Attributable to Non-controlling

Interest

Contributed equity

Reserves Retained profits TotalNon-controlling

InterestTotal Equity

$’000 $’000 $’000 $’000 $’000 $’000

Balance at 1 July 2010 68 (95,647) (447,283) (542,862) 90,936 (451,926)Profit (loss) after tax - - 13,040 13,040 356 13,396 Other comprehensive income - 5,977 - 5,977 8,901 14,878 Total comprehensive income - 5,977 13,040 19,017 9,257 28,274

Transactions with owners in their capacity as ownersSecurities cancelled pursuant to share buy-back (1) - - (1) - (1)Dividends to non-controlling interests - - - - (1,149) (1,149)Balance at 31 December 2010 67 (89,670) (434,243) (523,846) 99,044 (424,802)

Balance at 1 July 2011 67 (66,510) (451,973) (518,416) 102,145 (416,271)Profit (loss) after tax attributable to CIF securityholders - - (115,521) (115,521) (21,555) (137,076)Other comprehensive income - (8,079) - (8,079) (10,932) (19,011)Total comprehensive income - (8,079) (115,521) (123,600) (32,487) (156,087)

Transactions with owners in their capacity as ownersAcquisition of Inexus non-controlling interests - - (3,782) (3,782) 3,782 -

Dividends to non-controlling interests - - - - (700) (700)

Balance at 31 December 2011 67 (74,589) (571,276) (645,798) 72,740 (573,058)

The consolidated statement of changes on equity should be read in conjunction with the accompanying notes.

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Consolidated statement of cash flows



Group

31-Dec-11 31-Dec-10 31-Dec-11 31-Dec-10

$’000 $’000 $’000 $’000

Cash flows from operating activities 0Receipts from customers 0 174,892 173,725 174,892 173,725 Payments to suppliers 0 (88,813) (83,836) (88,254) (82,920)Interest received 0 5,239 5,674 243 235 Interest paid 0 (41,360) (41,897) (41,360) (41,897)

Tax paid (1,938) (98) (1,938) (98)

Net cash flow from operating activities 48,020 53,568 43,583 49,045 Cash flows from investing activities 0Payments for purchase of property, plant and equipment 0 (40,200) (45,045) (40,200) (45,045)Acquisition of Inexus non-controlling preference shares

and loan notes (9,081) - (9,081) -

Net cash flow from investing activities 0 (49,281) (45,045) (49,281) (45,045)Cash flows from financing activities 0Security buy-back 0 - (2,982) - - Transaction costs of buy-back of securities 0 - (6) - - Proceeds from borrowings 0 21,249 5,745 27,478 5,745 Repayment of borrowings 0 (4,422) (4,680) (4,422) (5,224)Dividends to non-controlling interests 0 (700) (837) (700) (837)Distributions paid to securityholders 0 (22,136) (22,302) - -

Net cash flow from financing activities 0 (6,009) (25,062) 22,356 (316)

Net increase (decrease) in cash assets held 0 (7,270) (16,539) 16,658 3,684 Cash and cash equivalents at beginning of year 0 204,400 260,745 29,459 47,800

Net foreign exchange differences 0 (347) (6,621) (840) (6,423)

Cash and cash equivalents at end of year 196,783 237,585 45,277 45,061

The consolidated statement of cash flows should be read in conjunction with the accompanying notes.

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Notes to the financial statements

1. Corporate information

The financial report for the half-year ended 31 December 2011 was authorised for issue in accordance with a resolution of the Directors of the Responsible Entity dated 23 February 2012.

Challenger Infrastructure Fund (CIF) consists of two stapled Australian registered managed investment schemes: CIF1 and CIF2. Each security consists of one unit in CIF1 and one unit in CIF2. Units are stapled together so that one cannot be transferred, or otherwise dealt with, without the other. CIF is publicly traded on the Australian Securities Exchange (ASX). Challenger Listed Investments Limited (CLIL), the Responsible Entity of the Scheme, is incorporated and domiciled in Australia. The principal activity of CIF during the period was the investment of CIF funds in UK, European, North American and Asian infrastructure assets.

2. Summary of accounting policies

This General Purpose Condensed financial report for the interim half year ended 31 December 2011 has been prepared in accordance with accounting standard AASB 134: Interim Financial Reporting and the Corporations Act 2001. The accounting policies adopted are consistent with those of the previous financial period and corresponding interim reporting period, except for matters set out in 2(ii) below. (i) Basis of preparation

The interim financial report does not include all notes of the type normally included within the annual financial report and therefore cannot be expected to provide as full an understanding of the financial performance, financial position and financing and investing activities of the consolidated entity as the full financial report. The interim financial report should be read in conjunction with the annual financial report of CIF for the period ended 30 June 2011 and any public announcements made by CIF and its controlled entities during the half year ended 31 December 2011 in accordance with the continuous disclosure obligations arising under the Corporations Act 2001 and the ASX listing rules. The interim financial report has been prepared based on a business combination by the parent entity, and in recognition of the fact that the securities issued by CIF1 and CIF2 have been stapled and cannot be traded separately. CIF1 and CIF2 are included as part of equity attributable to equity holders of the stapled group, in accordance with AASB 127 and AASB 3. For the purposes of this report, “Challenger Infrastructure Fund” represents CIF1 and its controlled entities and “Challenger Infrastructure Trust Group” represents CIF2 and its controlled entities. The interim financial report is presented in Australian dollars (AUD) and all values are rounded to the nearest thousand dollars ($’000) unless otherwise stated under the option available to CIF under ASIC Class Order 98/100. CIF is an entity to which the class order applies.

The interim financial report has been prepared in accordance with ASIC Class Order 05/642 which allows issuers of stapled securities to include their financial statements and the consolidated or combined financial statements of the stapled group in adjacent columns in one financial report.

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Notes to the financial statements (continued) (ii) Application of new and revised accounting standards

Changes in accounting policy or disclosure The adoption of amendments and changes which were effective during the period did not result in any material changes to the financial report. There were no other changes in accounting policy applied during the period. Accounting standards and interpretations issued but not yet effective There are a number of amendments to Australian Accounting Standards, in addition to those described in the most recent annual financial report, that are available for early adoption but that have not been applied in this half-year financial report. The amendments would have resulted in only minor disclosure impacts if they had been early adopted.

(iii) Significant accounting judgements, estimates and assumptions

The carrying amount of certain assets and liabilities are often determined based on estimates and assumptions of future events. The key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of certain assets and liabilities within the next semi-annual reporting period are impairment of goodwill, share based payments, valuation of investments, valuation of derivatives and environmental provisioning.

(iv) Net assets

CIF consists of two stapled Australian registered managed investment schemes: CIF Investment Trust 1 (CIF1) and CIF Investment Trust 2 (CIF2). Since units are stapled together so that one cannot be transferred, or otherwise dealt with, without the other, the Directors of the Responsible Entity believe the most appropriate measure of the net assets of the Challenger Infrastructure Fund are those reported as the CIF1 consolidated net assets. As at 31 December 2011, the net assets of the CIF1 consolidated were $235.1m Notwithstanding the Fund’s consolidated net assets of $235.1m, under the Corporations Act 2001 the Challenger Infrastructure Fund is required to present the financial statements of the CIF2 stapled securities as a standalone entity. As at 31 December 2011, the CIF2 consolidated group reported a net asset deficiency of $573.1m. Included within the net asset deficiency as at 31 December 2011, is a related party borrowing from CIF1 of $642.9m. Since CIF1 and CIF2 are stapled units together such that one cannot be transferred, or otherwise dealt with, without the other, when considering the going concern assumption in preparing the financial statements of CIF2 the directors of the Responsible Entity are of the view related party loans between the CIF1 and CIF2 staple should be excluded. After adjusting for these loans the CIF2 net assets as at 31 December 2011 were $69.8m. CIF1 has agreed to continue to make available to CIF2 these borrowings to enable CIF2 to pay its debts as and when they fall due.

(v) Inexus tax adjustment

In the half year Inexus Management amended tax balances held relating to prior periods based on a review of tax legislation and discussion with Her Majesty's Revenue and Customs (HMRC). The resulting tax adjustment raised a £795k (A$1.2m) current tax liability and £848k (A$1.3m) reduction in deferred tax asset included in the Inexus 30 June 2011 statutory accounts. This adjustment has been recorded in the opening CIF consolidated and CIF2 balance sheets. F

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Notes to the financial statements (continued) (vi) Net current liability

The CIF1 consolidated current net asset deficiency at 31 December 2011 of $1,007m (CIF2: $1,173m) is primarily due to the Inexus debt which matures on 31 August 2012, as well as associated interest rate swaps. The Inexus Group Limited audited financial statements for the year ended 30 June 2011 were signed on 21 December 2011 and EY UK provided an unqualified audit opinion with an emphasis of matter relating to the debt refinance due in August 2012 and the belief of the Inexus Directors that the company is able to continue operations as a going concern. We note that any debts of Inexus are non-recourse to LBC or CIF. Accordingly, any uncertainty that remains around the Inexus refinance does not impact on the ability of CIF to continue as a going concern. Inexus debt refinance

Inexus has debt facilities of £461m which mature on 31 August 2012, as well as associated interest rate swaps having an unrealised mark-to-market position including inflation accretion of £279m. Inexus has been in discussions with debt providers in readiness for the upcoming refinancing. A number of funders, including the majority of current syndicate banks, have expressed interest in providing Inexus with financing. Conditions in the European debt capital markets have continued to be difficult impacting the proposed finance package discussed with the banks. Nevertheless, CIF is confident a refinancing can be agreed, and has available cash reserves ($138.6m after the 31 December 2011 distribution) to support such a refinancing. The refinancing discussions will be progressed in tandem with the strategic review process.

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3. Expenses


Group

31-Dec-11 31-Dec-10 31-Dec-11 31-Dec-10

$’000 $’000 $’000 $’000

Operating expensesManagement fees (1,406) (998) (927) (596)

Fund operating expenses 1 (2,890) (477) (100) (1)Inexus operating expenses (6,967) (7,321) (6,967) (7,321)

LBC operating expenses (44,271) (45,005) (44,271) (45,005)

Total operating expenses (55,534) (53,801) (52,265) (52,923)

Depreciation and amortisationAmortisation of intangibles (1,058) (1,277) (1,058) (1,277)

Depreciation of property, plant and equipment (28,940) (29,335) (28,940) (29,335)

Total depreciation and amortisation (29,998) (30,612) (29,998) (30,612)

1 Fund operating expenses for the current period include strategic review costs to non-related parties of $2.5m

4. Realised and unrealised gains (losses)


Group

31-Dec-11 31-Dec-10 31-Dec-11 31-Dec-10

$’000 $’000 $’000 $’000

Realised gains (losses)Realised gain (loss) – currency derivatives - (707) - (707)

Realised gain (loss) – foreign exchange (335) (189) (314) (174)

Total realised gains (losses) (335) (896) (314) (881)

Unrealised gains (losses)Unrealised gain (loss) – currency derivatives (1,250) 6,024 (1,250) 6,024 Unrealised gain (loss) – interest rate derivatives (25,030) 1,352 (25,030) 1,352 Unrealised gain (loss) – inflation derivatives (110,377) 18,570 (110,377) 18,570 Unrealised gain (loss) – foreign exchange (1,148) (19,295) (34) (7,184)Total unrealised gains (losses) (137,805) 6,651 (136,691) 18,762

Total realised and unrealised gains (losses) (138,140) 5,755 (137,005) 17,881

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5. Financing costs


Group

31-Dec-11 31-Dec-10 31-Dec-11 31-Dec-10

$’000 $’000 $’000 $’000

Interest bearing liabilities – external (50,117) (43,185) (50,117) (42,309)Interest bearing liabilities – related entities (1,867) (1,885) (5,549) (6,453)Preference shares and loan notes –

Inexus non-controlling interests (2,120) (2,338) (2,120) (2,338)Loan notes - LBC non-controlling interests (392) (412) (392) (412)

Total financing costs (54,496) (47,820) (58,178) (51,512)

6. Trade and other receivables


Group

31-Dec-11 30-Jun-11 31-Dec-11 30-Jun-11

$’000 $’000 $’000 $’000

Trade receivables 32,070 31,965 32,070 31,965 Accrued income 15,209 17,792 15,209 17,792 Related party receivables 917 898 - - Loan and interest receivable 16,397 16,882 16,217 16,032

Other receivables 4,448 8,964 4,381 8,617

Total 69,041 76,501 67,877 74,406

Trade and other receivables can be classified as follows:

- Due within 1 year 66,545 73,434 65,381 71,339 - Due greater than 1 year 2,496 3,067 2,496 3,067

Total trade and other receivables 69,041 76,501 67,877 74,406

7. Property plant and equipment


Group

31-Dec-11 30-Jun-11 31-Dec-11 30-Jun-11

$’000 $’000 $’000 $’000

Infrastructure 1,003,175 998,756 1,003,175 998,756 Other plant and equipment 28,100 25,923 28,100 25,923 Land 25,352 24,238 25,352 24,238 Buildings 64,948 65,269 64,948 65,269

Total 1,121,575 1,114,186 1,121,575 1,114,186 All property, plant and equipment are classified as non-current assets.

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8. Intangible assets

Challenger Infrastructure Fund Challenger Infrastructure Trust Group

31-Dec-11 30-Jun-11 31-Dec-11 30-Jun-11

$’000 $’000 $’000 $’000

Goodwill – InexusCost 1,023,841 1,023,841 1,023,841 1,023,841 Foreign currency translation (376,003) (382,977) (376,003) (382,977)

Total goodwill – Inexus 647,838 640,864 647,838 640,864 Goodwill – LBCCost 493,267 493,267 493,267 493,267 Less accumulated impairment (155,778) (155,778) (155,778) (155,778)

Foreign currency translation (71,158) (53,017) (71,158) (53,017)

Total goodwill – LBC 266,331 284,472 266,331 284,472 Leasehold contractsCost 26,761 26,761 26,761 26,761

Less accumulated amortisation (7,759) (7,175) (7,759) (7,175)

Foreign currency translation (3,788) (3,787) (3,788) (3,787)

Total leasehold contracts 15,214 15,799 15,214 15,799 Software licensesCost 24,597 24,468 24,597 24,468 Less accumulated amortisation (17,126) (16,652) (17,126) (16,652)

Less impairment charge (7,105) (7,105) (7,105) (7,105)

Foreign currency translation 1,228 1,056 1,228 1,056

Total software licenses 1,594 1,767 1,594 1,767

Total intangible assets 930,977 942,902 930,977 942,902 All intangible assets are classified as non-current assets. 9. Impairment testing Impairment testing is required to be performed on an annual basis at the testing date, which is at 30 June annually for CIF. If indicators of impairment exist at half-year, impairment testing is required to be performed. A detailed assessment has been performed by management concluding no indicators of impairment exist at 31 December 2011. For details of the annual impairment testing performed, please refer to CIF's annual financial report. 10. Trade and other payables


31-Dec-11 30-Jun-11 31-Dec-11 30-Jun-11

$’000 $’000 $’000 $’000

Trade creditors and accruals 106,235 114,067 103,612 113,917 Interest payable 108,396 97,924 139,909 126,493 Related party payables 1,057 761 554 511

Total 215,688 212,752 244,075 240,921 Trade and other payables can be classified as follows:- Due within 1 year 215,688 134,723 244,075 162,892 - Due greater than 1 year - 78,029 - 78,029 Total trade and other payables 215,688 212,752 244,075 240,921

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11. Interest bearing liabilities

Challenger Infrastructure Fund Challenger Infrastructure Fund

31-Dec-11 30-Jun-11

Outstanding1 Facility Unused Outstanding1 Facility Unused

$’000 $’000 $’000 $’000 $’000 $’000

Financial institution loans

Senior bank debt – Inexus 618,606 645,774 24,628 604,836 638,821 29,616

Junior bank debt – Inexus 53,057 53,057 - 52,485 52,485 - Senior bank debt – LBC 460,267 520,639 57,736 449,742 511,088 58,311 Other senior debt facilities - LBC 46,547 46,547 - 53,209 53,268 -

Junior bank debt - LBC 94,627 94,498 - 82,293 99,378 17,086

Total financial institution loans 1,273,104 1,360,515 82,364 1,242,565 1,355,040 105,013

Non-financial institution loans

Loan notes - Inexus non-controlling interests 13,574 14,569

Loan notes - LBC non-controlling interests 10,577 11,314

Total non-financial institution loans 24,151 25,883

Total interest bearing liabilities 1,297,255 1,268,448

Preference shares issued to Inexus non-controlling interests 35,822 41,427

Interest bearing liabilities and preference shares can be classified as follows:- Due within 1 year 693,186 7,533 - Due greater than 1 year 639,891 1,302,342 Total interest bearing liabilities 1,333,077 1,309,875

Challen ger Infrastructure T rust Group Ch allenger Infrastructure T ru st Group

31-Dec-11 30-Jun-11

Outstandin g1 Facil ity Unused Outstanding1 Facility Unused

$’000 $’000 $’000 $’000 $’000 $’000

Financial institution loans

Senior bank debt – Inexus 618,606 645,774 24,628 604,836 638,821 29,616

Junior bank debt – Inexus 53,057 53,057 - 52,485 52,485 - Senior bank debt – LBC 460,267 520,639 57,736 449,742 511,088 58,311 Other senior debt fac ilities - LBC 46,547 46,547 - 53,209 53,268 -

Junior bank debt - LBC 94,627 94,498 - 82,293 99,378 17,086

Total financial institution loans 1,273,104 1,360,515 82,364 1,242,565 1,355,040 105,013

Non-financial institution loans

Loan notes - Inexus non-controlling interests 13,574 14,569 Loan notes - LBC non-controlling interests 10,577 11,314

Related party 2 642,865 637,529

Total non-financial institution loans 667,016 663,412


Preference shares issued to Inexus non-controlling interests 35,822 41,427

Interest bearing liabilities and preference shares can be classified as follows:- Due within 1 year 693,186 7,533 - Due greater than 1 year 1,282,756 1,939,871


1 Total capitalised debt establishment fees of $5.2m (30 June 2011: $7.4m) have been offset against the outstanding amount for each respective facility. 2 Related party loans between wholly owned subsidiaries of CIF and Challenger Infrastructure Trust Group.

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11. Interest bearing liabilities (continued) Senior and junior bank debt - Inexus Inexus has committed debt facilities of £461.0m ($698.8m), comprising £426.0m ($645.7m) of senior debt and £35.0m ($53.1m) of junior debt facilities, which mature on 31 August 2012. The debt facilities are secured by fixed and floating charges granted by Challenger Connections Company Limited, Challenger Connections Mid Company Limited, Inexus Group (Holdings) Limited and its material subsidiaries over all assets (excluding relevant assets in regulated subsidiaries). For status of refinance refer to Note 2 (vi). Senior and junior bank debt – LBC LBC debt facilities comprises of a senior bank debt facility of US$419.1m and �88.6m ($520.6m), junior bank debt facility of US$19.0m and �60.2m ($94.5m) and Other senior debt facilities of $US7.2m and �31.3m ($46.5m). The debt facilities are secured by fixed and floating charges granted by Challenger LBC Terminals Holding Company Limited over the assets of LBC. The maturity of the senior debt facility is 31 May 2014 and junior debt facility is 30 June 2014. The maturities of other senior debt facilities range between April 2015 and November 2019. All Inexus and LBC covenants have been complied with during the period

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12. Derivative financial instruments


31-Dec-11 30-Jun-11 31-Dec-11 30-Jun-11

$’000 $’000 $’000 $’000

Derivative financial assetsForeign currency contracts- LBC FX hedges - 688 - 688 Total derivative financial assets - 688 - 688

Derivative financial assets can be classified as follows: - - Due within 1 year - 511 - 511 - Due greater than 1 year - 177 - 177 Total derivative financial assets - 688 - 688 Derivative financial liabilitiesForeign currency contracts- LBC FX hedges (469) - (469) - Interest rate hedges- LBC interest rate hedges (8,842) (19,138) (8,842) (19,138)- Inexus interest rate hedges (41,831) (17,037) (41,831) (17,037)Inflation hedges - Inexus (296,600) (186,709) (296,600) (186,709)Total derivative financial liabilities (347,742) (222,884) (347,742) (222,884)

Derivative financial liabilities can be classified as follows:

- Due within 1 year (347,325) (24,820) (347,325) (24,820)- Due greater than 1 year (417) (198,064) (417) (198,064)Total derivative financial liabilities (347,742) (222,884) (347,742) (222,884)

The $110m Inexus inflation hedges liability movement is attributable to a 99 bps decrease in real rates at 2030 as part of an overall 29 bps decrease in the real rates curve, coupled with a 130 bps decrease in the discount rate at 2030. The $25m increase in Inexus interest rate hedges is attributable to a decrease in the LIBOR forward rate curve of 88 bps during the period.

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13. Contributed equity

31-Dec-11 30-Ju n-11 31-Dec-11 30-Ju n-11

$'000 $'000 $'000 $'000

Movement in securities on issue

Ordinary securities on issue at the beginning of the period 1,212,758 1,215,740 67 68

Ordinary securities bought back - (2,982) - (1)

Total Ordinary securities on issue 1,212,758 1,212,758 67 67

Total transaction costs of security issues and buy-backs (29,205) (29,205) - -

Total stapled securities on issue 1,183,553 1,183,553 67 67

C hallenger Infrastructure Fund Ch al lenger Infrastru cture T rust Group

On 6 January 2009, CIF commenced an on-market buy-back of CIF securities. On 22 December 2009, the buy-back was extended for an unlimited duration pursuant to ASIC class order 07/422. The buy-back will not exceed 10% of securities over a 12 month period. At 31 December 2011, 34.7 million CIF securities have been bought back since commencement of the buy-back at an average price of $1.49 per security. No securities were bought back during the half year period.

31-Dec-11 30-Jun-11 31-Dec-11 30-Jun-11

Number of stapled securities

'000


'000


'000


'000

Movement in securities on issueOrdinary securities on issue at the beginning of the period 316,224 318,570 316,224 318,570 Ordinary securities bought back - (2,346) - (2,346)

Total stapled securities on issue 316,224 316,224 316,224 316,224


Group

14. Reserves

Challenger Infrastructure Fund

31-Dec-11 30-Jun-11 31-Dec-11 30-Jun-11

$’000 $’000 $’000 $’000

Cash flow hedge reserve (11,202) (18,198) (11,202) (18,198)Capital distribution reserve (398,128) (382,317) (7,016) (7,016)Foreign currency translation reserve (55,242) (40,167) (56,371) (41,296)

Total reserves (464,572) (440,682) (74,589) (66,510)

Challenger Infrastructure Trust Group

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15. Segment information Operating segments have been determined based on the reports reviewed by CIF’s manager (Challenger Management Services Limited (CMSL)) that are used in assessing performance and making strategic decisions. The manager (CMSL) considers CIF from a business segment perspective. CIF has three segments comprising Inexus, LBC and Fund. Challenger Infrastructure Trust Group has two segments comprising Inexus and LBC. Business segment Inexus Inexus is involved in the design, construction, ownership, operation and maintenance of utility networks and associated site infrastructure, serving new housing developments throughout the UK. LBC LBC is an independent operator of storage terminals for chemicals, base oils and petroleum globally. Fund Fund segment includes other activities conducted by the Fund including management of cash and the Fund. The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies.

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15. Segment information (continued)



RevenueInterest income 2 136 4,153 4,291

Revenue from external customers 1 50,181 123,927 - 174,108

Total revenue from external customers 1 50,183 124,063 4,153 178,399 Total segment revenue 50,183 124,063 4,153 178,399 Operating expenses and cost of sales (14,227) (73,567) (4,285) (92,079)Earnings before interest, taxation, depreciation, amortisation and fair value movements 35,956 50,496 (132) 86,320 Depreciation and amortisation (7,409) (22,589) - (29,998)Financing costs (33,410) (21,086) - (54,496)Total unrealised and realised gains/(losses) (135,407) (1,597) (1,136) (138,140)Profit (loss) before tax (140,270) 5,224 (1,268) (136,314)Income tax benefit (expense) 439 2,157 (34) 2,562

Profit (loss) after tax (139,831) 7,381 (1,302) (133,752)

Net current assets 2 (1,137,163) (6,157) 136,049 (1,007,271)

Total assets per balance sheet 2,3 1,038,760 1,146,735 158,437 2,343,932

Total liabilities per balance sheet 2 1,224,117 865,272 19,490 2,108,879

Net assets 2 (185,357) 281,463 138,947 235,053



RevenueInterest income 2 66 5,572 5,640

Revenue from external customers 1 51,900 121,229 - 173,129 Total segment revenue 51,902 121,295 5,572 178,769 Operating expenses and cost of sales (14,112) (74,172) (879) (89,163)Earnings before interest, taxation, depreciation, amortisation and fair value movements 37,790 47,123 4,693 89,606 Depreciation and amortisation (6,979) (23,633) - (30,612)Financing costs (27,449) (20,372) 1 (47,820)Total unrealised and realised gains/(losses) 19,922 (2,041) (12,126) 5,755 Profit (loss) before tax 23,284 1,077 (7,432) 16,929 Income tax benefit (expense) 643 (8,002) (57) (7,416)

Profit (loss) after tax 23,927 (6,925) (7,489) 9,513

Net current assets 4 (55,255) (16,238) 177,133 105,640

Total assets per balance sheet 4 1,027,780 1,171,257 203,417 2,402,454

Total liabilities per balance sheet 4 1,066,228 902,762 23,297 1,992,287

Net assets 4 (38,448) 268,495 180,120 410,167

1 There is nil intersegment revenue

2 As at 31 December 2011 3 Total Fund segment assets includes $154.4m of cash and cash equivalents 4 As at 31 December 2010 5 Segment information is shown net of consolidation elimination entries F

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15. Segment information (continued)

Challenger Infrastructure Trust Group Inexus LBC Total Segments Reconciliation TOTAL

Half year ended 31 December 2011 $’000 $’000 $’000 $’000 $’000

RevenueInterest income 2 136 138 107 245

Revenue from external customers 1 50,181 123,927 174,108 - 174,108 Total segment revenue 50,183 124,063 174,246 107 174,353 Operating expenses and cost of sales (14,227) (73,567) (87,794) (1,016) (88,810)Earnings before interest, taxation, depreciation, amortisation and fair value movements 35,956 50,496 86,452 (909) 85,543 Depreciation and amortisation (7,409) (22,589) (29,998) - (29,998)Financing costs (33,410) (21,086) (54,496) (3,682) (58,178)Total unrealised and realised gains/(losses) (135,407) (1,597) (137,004) (1) (137,005)Profit (loss) before tax (140,270) 5,224 (135,046) (4,592) (139,638)Income tax benefit (expense) 439 2,157 2,596 (34) 2,562 Profit (loss) after tax (139,831) 7,381 (132,450) (4,626) (137,076)

Net current assets 2 (1,137,163) (6,157) (1,143,320) (29,197) (1,172,517)

Total assets per balance sheet 2 1,038,760 1,146,735 2,185,495 5,767 2,191,262

Total liabilities per balance sheet 2 1,224,117 865,272 2,089,389 674,931 2,764,320

Net assets 2 (185,357) 281,463 96,106 (573,058)

Challenger Infrastructure Trust Group Inexus LBC Total Segments Reconciliation TOTAL

Half year ended 31 December 2010 $’000 $’000 $’000 $’000 $’000

RevenueInterest income 2 66 68 143 211

Revenue from external customers 1 51,900 121,229 173,129 - 173,129 Total segment revenue 51,902 121,295 173,197 143 173,340 Operating expenses and cost of sales (14,112) (74,172) (88,284) (1) (88,285)Earnings before interest, taxation, depreciation, amortisation and fair value movements 37,790 47,123 84,913 142 85,055 Depreciation and amortisation (6,979) (23,633) (30,612) - (30,612)Financing costs (27,449) (20,372) (47,821) (3,691) (51,512)Total unrealised and realised gains/(losses) 19,922 (2,041) 17,881 - 17,881 Profit (loss) before tax 23,284 1,077 24,361 (3,549) 20,812 Income tax benefit (expense) 643 (8,002) (7,359) (57) (7,416)Profit (loss) after tax 23,927 (6,925) 17,002 (3,606) 13,396

Net current assets 3 (76,907) (20,474) (97,381) 5,373 (92,008)

Total assets per balance sheet 3 1,027,780 1,171,257 2,199,037 8,873 2,207,910

Total liabilities per balance sheet 3 1,066,228 902,762 1,968,990 663,722 2,632,712

Net assets 3 (38,448) 268,495 230,047 (424,802) 1 There is nil intersegment revenue

2 As at 31 December 2011 3 As at 31 December 2010

16. Events subsequent to balance date There has been no matter or circumstance that has arisen since the end of the financial period that has significantly affected, or will affect, CIF’s operations in future financial years, the results of those operations or CIF’s state of affairs in future financial years. 17. Contingencies There has been no material change from 30 June 2011. F

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Statement by the Directors of the Responsible Entity of CIF

On the Financial Report of the Challenger Infrastructure Fund In accordance with a resolution of the Directors of Challenger Listed Investments Limited (the Responsible Entity of the CIF Investment Trust 1 (CIF1) and CIF Investment Trust 2 (CIF2), collectively known as the Challenger Infrastructure Fund (CIF)), I state that: In the opinion of the Directors: (a) The financial statements and notes of CIF1 and CIF2 are in accordance with the Scheme

Constitutions and the Corporations Act 2001, including:

(i) giving a true and fair view of the consolidated entities’ financial position as at 31 December 2011 and of its performance for the period ended on that date; and

(ii) complying with Accounting Standard AASB 134: Interim Financial Reporting and Corporations

Regulations 2001; and (b) There are reasonable grounds to believe that CIF1 and CIF2 will be able to pay its debts as and when

they become due and payable.

Michael Cole Chair Sydney 23 February 2012

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^^^ ^^ I ^ IIIIllllllll MERNST&YOUNGI^IErnst & Young Centre680 George StreetSydney NSW 2000 AustraliaGPO Box 2646 Sydney NSW 2001

Tel: +61 2 9248 5555Fax: +61 2 9248 5959www.ey.com/au

Independent auditor's report to the stapled security holders of CIFInvestment Trust 1 and CIF Investment Trust 2, collectively known asthe Challenger Infrastructure Fund (CIF)Challenger Infrastructure Fund (CIF or the "Combined Group") comprises CIF Investment Trust 1 and theentities it controlled at the half year's end or from time to time during the financial period ("CIF1") andCIF Investment Trust 2 and the entities it controlled at the half year's end or from time to time during thefinancial period ("CIF2").

Report on the Half-Year Financial ReportWe have reviewed the accompanying half-year financial report of Challenger Infrastructure Fund (CIF),which comprises the statements of financial position as at 31 December 2011, the statements ofcomprehensive income, statements of changes in equity and statements of cash flows for the half-yearended on that date, notes comprising a summary of significant accounting policies and other explanatoryinformation, and the directors' declaration of the consolidated entity comprising CIF1 and CIF2 and theentities they controlled at the half-year end or from time to time during the half-year.

Directors' Responsibility for the Half-Year Financial Report

The directors of Challenger Listed Investments Limited, as Responsible Entity for CIF1 and CIF2(collectively referred to as "the Directors"), are responsible for the preparation of the half-year financialreport that gives a true and fair view in accordance with Australian Accounting Standards and theCorporations Act 2001 and for such internal controls as the directors determine are necessary to enablethe preparation of the half-year financial report that is free from material misstatement, whether due tofraud or error.

Auditor's Responsibility

Our responsibility is to express a conclusion on the half-year financial report based on our review. Weconducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Reviewof a Financial Report Performed by the Independent Auditor of the Entity, in order to state whether, onthe basis of the procedures described, we have become aware of any matter that makes us believe thatthe financial report is not in accordance with the Corporations Act 2001 including: giving a true and fairview of the Combined Group's financial position as at 31 December 2011 and its performance for thehalf-year ended on that date; and complying with Accounting Standard AASB 134 Interim FinancialReporting and the Corporations Regulations 2001 . As the auditor of CIF1 and CIF2 and the entities theycontrolled during the half-year, ASRE 2410 requires that we comply with the ethical requirementsrelevant to the audit of the annual financial report.

A review of a half-year financial report consists of making enquiries, primarily of persons responsible forfinancial and accounting matters, and applying analytical and other review procedures. A review issubstantially less in scope than an audit conducted in accordance with Australian Auditing Standards andconsequently does not enable us to obtain assurance that we would become aware of all significantmatters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Liability limited by a scheme approvedunder Professional Standards Legislation

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Independence

In conducting our review, we have complied with the independence requirements of the Corporations Act2001. We have given to the directors of the Responsible Entity a written Auditor's IndependenceDeclaration, a copy of which follows the Directors' Report.

Conclusion

Based on our review, which is not an audit, we have not become aware of any matter that makes usbelieve that the half-year financial report of CIF1 and CIF2 is not in accordance with the Corporations Act2001, including:

a) giving a true and fair view of the consolidated entity's financial positions as at 31 December 2011and of its performance for the half-year ended on that date; and

b) complying with Accounting Standard AASB 134 Interim Financial Reporting and the CorporationsRegulations 2001.

Emphasis of Matter -Net Current Liabilities

Without qualifying our opinion, we draw attention to Note 2(vi) in the financial report which states thatcurrent liabilities exceed current assets by $1,007m for CIF1 and $1,173m for CIF2, due to (nexus acontrolled entity of CIF 1 and CIF2 needing to refinance its debt and swaps which mature within 12months. The financial report has been prepared on the basis that Inexus continues as a going concern.

Ernst & Young

Clare SporlePartnerSydney

23 February 2012

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Appendix 4D - Results for announcement to the market ... · Distribution (cents per unit) Record...

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