Equity Markets Group
Chairman's and Managing Director's Report

Equity Markets Group's result included an exceptional first half, supported by excellent trading conditions locally and internationally. The Group expanded its product offering and entered select new offshore markets.

With a more diverse product range and expanded offshore operations, the Group is well placed to respond to changing market conditions.

Equity Markets Group (EMG) achieved another record contribution, 50 per cent up on 2005. It experienced extremely favourable trading conditions in the first half of the year, with two thirds of the Group's contribution made in the first half. A deterioration in business conditions was experienced in the second half.

The Australian business continued to perform well with strong market positions maintained in key products and through new product launches during the year.

The hedge funds business, operating under the Newton and Equinox brands, achieved excellent returns from its managed funds and continues to grow funds under management.

International

Internationally, EMG continued the focus on Asian markets, offering products over Hong Kong, Korean, Japanese, Taiwanese, Indian and Singaporean equities. The Group commenced issuing warrants in the Singaporean market during the 2005 financial year and is now one of the top issuers of this product.

Asia remains the largest contributor in income with increases from markets in Japan, Korea and Singapore, more than offsetting the lower contribution from Hong Kong.

EMG now conducts business in Japanese equities in its own right, following the decision to end the business alliance with Mizuho Securities in Japan on  30 September 2005. Our business alliances with Nedbank in South Africa and Woori Bank in Korea continued to perform well during the year.

The Brazilian equity derivatives business was well ahead of 2005, expanding its product range and becoming a leading market maker in single stock equity options.

The contribution from sales of equity derivatives linked to US and European equities was ahead of  2005, following the establishment of a desk in New York during the year.

As previously advised to shareholders, the Head of  EMG, Ottmar Weiss, retired as Group Head with effect from 30 September 2005 and retired as an Executive Director on 31 March 2006. He was replaced by Kim Burke, who previously led the Group's Asian operations. Mr Weiss continues to work with EMG as a Non Executive Director of the Group's funds management entities.

Outlook

EMG has developed a more diversified business and is well placed to respond to changing market conditions. EMG will continue to focus on Asia and expand product issuance across the region. We expect broadly favourable market conditions to continue, however, as always, the Group is not immune to a sustained downturn in global equity market volumes.