Company Reports

MANAGING DIRECTOR'S REPORT 2008

The acquisition of Mackay Permanent Building Society Ltd was undoubtedly the highlight of our activities in 2007/2008.

The takeover increased our assets by approximately $300 million. Significantly for our operations, Mackay Permanent had no reliance on wholesale funding for their lending program and their loan book was predominantly secured by residential property.

This initiative allowed us to expand our retail platform in North Queensland, strengthened our Mackay/Whitsunday representation and provided branch outlets and opportunities for future growth in Townsville and Cairns.

Wide Bay Australia now has a network covering essentially the whole of coastal Queensland from Robina through to Cairns. This structure is very important in sourcing our own loans, as distinct from paying brokers, and in growing our retail deposits.

Predominantly because of its smaller asset size, Mackay Permanent had a high cost-to-income ratio. This fact, together with some shopping centre branch closures where there was duplication, will allow us to achieve significant synergies and contributions to our profit for 2008/2009.

We have recently reviewed existing branch locations in Cairns and Townsville and it is anticipated that we will be relocating some of these branches over the next 12 months.

As the Managing Director, the year’s results have been very gratifying - including our 13.11% increase in profit to a record $18.16 million.

Our cost-to-income ratio increased from 53.6% in 2007/2008 to 55.5%, principally due to the Mackay acquisition and some additional branch costs. Even with that increase, I believe Wide Bay Australia maintains its record as one of the best performing Australian building societies in this respect, with the result also comparing favourably to a number of the regional banks.

Lending for the past year was strong showing an increase of 7% to $518 million. We have forecast this figure to drop significantly given the current economic situation and the downturn evident in housing demand. Given the increased cost of wholesale market funding, we have also increased our forecast in respect of our loan funding costs.

Even with these prevailing conditions and by taking into account that our figures will also be buoyed by the synergies we expect to receive from the Mackay acquisition; we are projecting after tax profit growth for 2008/2009 in the range of 15-20%.

Our lenders mortgage insurer, Mortgage Risk Management Pty Ltd performed well during the year and provided an after tax contribution of $2.41 million. Our 25% shareholding in Financial Technologies Securities Pty Ltd has also proven an excellent investment with high yields and important contributions to our lending growth.

The dividend declared for 3 October 2008 of 33 cents will bring our total dividend for the year to 66 cents per share.

At the time of writing, it appears that a large number of our shareholders have expressed their confidence in our operations by electing to participate in the Dividend Reinvestment Plan which was reintroduced for this dividend after being suspended in 2000.

During the year, our Chief Financial Officer, Bill Schafer, together with other members of our Management team have achieved the implementation of the ‘Basel II’ capital adequacy standards and the introduction of the ‘Anti-Money Laundering’ reform requirements.

We continue to be prudentially supervised by the Australian Prudential Regulatory Authority (APRA) which is the authority responsible for banks, building societies and credit unions. They continually monitor and supervise our operations. While there is a significant cost involved in complying to their standards, their operation provides additional comfort to our shareholders, investors and borrowers.

Looking forward, we are always willing to look at any opportunities that will allow us to expand or broaden our operations in a controlled manner - be it by acquisition, partnership or association - and we will continue to monitor the market in that regard.

The current economic situation will provide some challenges, but with our current structure, a strong balance sheet, restricting lending principally to mortgage insured residential loans with no ‘sub-prime’ or ‘low doc’ lending and the strong associations we have with our bankers and business partners, we are very comfortable and confident of producing solid results again this year.

I again extend my appreciation to my Management team for their continued efforts. We have a harmonious operation with very experienced people who accept the tasks at hand with confidence and enthusiasm. I also extend my appreciation to all of our Head Office and branch staff.

We are also very fortunate to have an excellent Board of Directors who approach their position in a very calculated and responsible manner and it is also a pleasure to work with them.

To our shareholders, depositors and borrowers who are all very important to our continued operations, I can assure them of our continued efforts in providing superior performance, first class service and products and services that meet their needs.

Yours faithfully,

R E HANCOCK
MANAGING DIRECTOR
29 September 2008
Bundaberg

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MANAGING DIRECTOR'S REPORT 2007

From a Managing Director's perspective 2006/2007 has been a further milestone in the ongoing development and achievement of Wide Bay Australia Ltd.

Our after tax profit was an all time high of $16.27 million, representing an 12.38% increase over the 2005/2006 results. This result was after writing off the expenses of our involvement in the attempted takeover of Pioneer Permanent Building Society Limited where we were ultimately unsuccessful. These expenses were in the range of $325,000 and from a taxation point of view are only able to be claimed over a five year period. Our profit growth excluding these expenses was approximately 14% for the year.

Our cost to income ratio further strengthened during the year improving by 3.1% from 56.7% in 2006 to 53.6% in 2007. This ratio is the best within the Australian building society/credit union sector for an organisation such as ours and rates very favourably with the cost performances of the regional banks.

This is reflected in the ongoing commitment of the society to the development of our computer systems contributing to on-going efficiencies and information access for our managers and staff. Our computerised loan processing system is being used extensively. It provides a very quick turnaround for loan applications, approvals and processing of the offer and mortgage documents but at the same time has tremendous capacity for us to expand our lending operations without further IT developments.

Our Senior Management Team is also very dedicated and lead, by example, a team of well trained and enthusiastic employees. The society continues to maintain the Staff Share Plan introduced when fixed shares were issued. This provides additional incentives for all staff to acquire Wide Bay Australia shares on an annual basis, with the assistance of an interest free loan, at a discount to the market of 10%, giving them an involvement and interest in the society's operations.

This year we are targeting an increase in our lending, predominantly through the area of commercial lending and margin loans that have been developed for managed funds. During the year we were approved by Aviva Australia Group, who operates the Navigator Australia Limited platform in respect of managed funds, as one of their four authorised lenders. In the ensuing year we will be promoting this product, with not only our own associated financial planning company, Financial Technology Securities Pty Ltd, of which we hold a 25% interest, but also to financial planners generally.

Our lenders mortgage insurance captive, Mortgage Risk Management Pty Ltd (MRM) has contributed an after tax profit of $2.23 million. This result was after we experienced an increase in claims for the year particularly in the Sydney market, where in some cases inner city units were devalued by up to 40% and also the western suburbs which has experienced a significant downturn and increase in mortgagee sales. We expect to maintain similar results for MRM for the coming year.

New branches continue to steadily expand our network and during the year a branch was opened in Gympie and Robina on the Gold Coast, bringing our total number of branches and agencies to 36 plus 2 lending centres. Additional ATM's have also been deployed where considered appropriate.

A final fully franked dividend of 30 cents was paid on 14 September 2007 bringing the total dividend for the year to 60 cents per share - a total payout of 92.9%. The Board has indicated they intend to maintain a dividend payout of 90% for the ensuing year, with capital adequacy currently 13.85% - well above the Australian Prudential Regulation Authority (APRA) requirement.

The year ahead will see the implementation of the Basel II requirements and also the introduction of money laundering legislation. While this will cause some additional work requirements, we do not anticipate any major issues. The standards under which we operate, set by APRA are being continually reviewed and updated. While there is a significant compliance cost we totally support their involvement.

I again extend my appreciation for the support of our shareholders, customers, staff and agents. In particular I appreciate the cooperation and commitment of our Senior Management Team, where we enjoy an extremely harmonious association. Our forecast is for trends of past years to be maintained for the ensuing year and with some of the initiatives already in place, see another exciting year in our development.

Yours faithfully,

R E HANCOCK
MANAGING DIRECTOR
14 August 2007
Bundaberg

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MANAGING DIRECTOR'S REPORT 2006

The slowing in the housing market over the last 12 months, particularly the last six months of the financial year and the society's reluctance to extensively use mortgage brokers, has seen loan approvals for the year reduce to $417 million compared to $494.6 million for 2004/2005. As part of the slowing of the market, we have also seen a slowing in the payouts and churning of existing loans and in fact our loan book has shown a growth of 8.24% with outstanding loans as at 30 June 2006, $1.425 billion.

During 2006/2007 we intend to review our loan products in comparison with the residential market, incorporate secured commercial lending and develop a limited margin loan product targeting a specific market sector. At the same time we intend to increase our use of broker introduced loan approvals representing up to 25% of our total loans. We are targeting solid growth in our lending for the ensuing year.

We continue to develop products as and when required and as opportunities arise. We have a Product Development Committee who are continually monitoring the market and looking for opportunities.

Our profit for the year of $14.478 million showed an increase of 16.64% with Mortgage Risk Management Pty Ltd, our wholly owned lenders mortgage insurer and our investment in Financial Technology Securities Pty Ltd contributing significantly to our overall results.

We continue to achieve excellent results with our cost to income ratio, where for the current year it has further improved from 57.8% to 56.7%. This ratio reflects the strength of our Management Team, the efficiency of our computer system and our training programs and overall the attention we apply to our operations. It represents one of the best ratios achieved in our industry.

These efficiencies are further reflected in the return on equity, which increased from 15% in 2005 to 16.4% for 2006. This is an excellent return for our structure and again reflects the efficiencies referred to previously.

During the year our capital adequacy grew to 15.77% as at 30 June 2006 and Management and the Board are continually monitoring our capital requirements to ensure the maximum efficiencies and management of capital.

Our assets and funds under management showed an increase of 7.87% throughout the year for a total of $1.645 billion as at 30 June 2006. We intend to continue to expand our network organically and various options are currently under consideration, including a further branch in Townsville where we already have a lending operation. New branches are planned for Gympie in December 2006 and the Robina Shopping Centre on the Gold Coast, early in 2007.

Our Chief Financial Officer has constantly monitored the pending changes in respect of the Basel II requirements in January 2008 and changes to the International Financial Reporting Standards, which are now fully operational. While these changes require a special effort from him and his staff, we anticipate that any changes will have only a minimal effect on our overall operations and results.

The payment of 51.5 cents per share franked dividend represents a 90% payout ratio consistent with the Board's previous advice, with the final payment of 26.5 cents payable in September 2006.

The society uses securitisation programs to fund its overall requirements. This has been the most significant contributing feature, with the closing of margin spreads over the past year and has seen our operating margins increase from 1.9% to the 2% to 2.1% range over recent months.

The Staff Share Plan continues to receive strong support from our employees, many of whom have participated annually since introduction in 1996. I believe it is a significant contributor to the support the society receives and enables staff to participate in the growth of the society through the movement in our share price and associated dividends.

Our Management Team is undoubtedly one of the most significant reasons for our continued success. We enjoy a very stable team and again there have been no significant changes for the current year. We work as a collective team and I extend my personal appreciation for their continued support, enthusiasm and commitment.

We also involve all of our staff in regular training sessions with staff training carried out at Head Office, which enables our staff away from Head Office to integrate with staff from other branches, as well as meeting personnel from Head Office, with whom they deal with on a regular basis. Our continuing staff training ensures a level of competency to attend to all enquiries that they receive on a daily basis.

The ensuing year promises to be another exciting year in our development, with those issues already in progress and no doubt the opportunities that will arise. We enthusiastically look forward to another successful year.

Yours faithfully,

R E HANCOCK
MANAGING DIRECTOR
12 September 2006
Bundaberg

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MANAGING DIRECTOR'S REPORT 2005

The past year has seen a general slowing in the housing market and our approvals for the year were $449.6 million compared to $485.4 million for 2003/2004. While lending approvals were down, the actual loan book grew by 12% to $1.31 billion.

Our capital adequacy as at 30 June 2005 was 14.05%. The society currently uses an off-balance sheet securitisation program and a further issue is expected in October/November 2005 for approximately $300 million, this will see our capital adequacy increase.

The profit for the year is particularly pleasing showing a growth of 25.46% over the previous year, with projections supporting a further strong 2005/2006 year. Mortgage Risk Management Pty Ltd (MRM) our wholly owned lenders mortgage insurer has contributed to these results showing a surplus of $2.6 million after tax.

Our cost ratios are very strong with cost to income for the year at 57.8%, our best performance to date. This compares to 62.7% for 2003/2004. Return on Equity was 15% compared to 12.4% for 2003/2004.

We have all but completed the electronic loans processing system and formal training has been completed with all of our loans personnel. The bulk of our mortgage documentation is now being prepared in-house, with the new procedures not only affecting some considerable cost savings but also providing us with the capacity to handle any reasonable growth in the foreseeable future.

We have opened new branches in Allenstown Rockhampton and Upper Mt Gravatt in Brisbane with a further branch scheduled for Camberwell in Melbourne in October/November 2005. These branches will give us a greater geographical spread from a lending perspective and are planned to help increase our level of lending from those areas.

Our Management team is busy assessing and planning for the introduction of the Basel requirements in January 2008 and the International Financial Reporting Standards which officially commenced in July this year. We believe that both these changes will have only a nominal effect on our overall operation and presentations.

We continue to develop our range of products with internet banking now becoming a very large growth area and our recent acquisition of a 25% share of Financial Technology Securities Pty Ltd will see us develop further our involvement in financial planning.

The Board has continued the Staff Share Plan, approved by shareholders some years ago and it is pleasing to see the strong support from all of our staff. It is always pleasing to note the interest and the involvement of the staff in relation to the performance of the society and the movement in our share price. It is a very big positive.

This year we have again seen a very stable workforce with no changes in our Senior Management team. We are very fortunate in having such a stable, qualified and experienced team and I extend my appreciation for their contribution where we work as a coordinated unit. We are very committed to staff training and all our staff visit Head Office for training sessions on a regular basis. All of our staff throughout the organisation, including our branches, are capable and display an enthusiasm which I believe flows to our customers being borrowers, investors and shareholders.

As is always the case the coming year will continue to be challenging with the slowing in the housing market and more likely increased competition affecting margins. With our branch expansion and our current operations I am confident we will continue to produce strong results.

Yours faithfully,

RE HANCOCK
MANAGING DIRECTOR
30 August 2005
Bundaberg

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MANAGING DIRECTOR'S REPORT 2004

Wide Bay Australia has enjoyed strong lending with the recent growth in the housing market. Over the past 12 months our total loan approvals were $485.4 million. This figure represents an increase of 28.5% over 2002-2003.

We continue to expect a strong performance for loans for the current year with the opening of our branch in Parramatta and other initiatives planned to increase our penetration in the capital cities. It has been noticeable though that there has been a general slowing in activity and demand for housing loans and we will no doubt see increased competition with a possible narrowing on interest rate margins.

A particularly pleasing aspect of our performance in 2003-2004 was the growth in our loan book of 15% to $1.16 billion. While this was influenced by our increased lending, we have noticed that there was a general slowing of the ‘churning’ of loans, particularly in southern capital cities.

The new in-house computer system, which will improve our capacity and provide overall efficiencies for processing our loans, is nearing full implementation. A large amount of mortgage documentation is now being sourced ‘in-house’. We are scheduled to complete a further ‘off market’ securitisation program of approximately $300 million in October 2004.

Our capital adequacy as at 30 June 2004 was 13.72% and after the projected securitisation program we anticipate that our capital will be in excess of 16%.

Our branch operations continue to operate satisfactorily with all branches now refurbished with new signage to Wide Bay Australia Ltd.

During the year we completed our compliance with the Financial Sector Reform Legislation (FSRA) - with all staff having the appropriate training and expertise to meet the requirements of that legislation.

We continue to improve and develop our range of products and services – with BPAY telephone banking and internet banking all receiving strong support.

Our captive Lenders Mortgage Insurer, Mortgage Risk Management Pty Ltd, has contributed solidly to our results for the year at $423,000 – even though this figure was impacted by an application of an Accounting Standard on commutation of our re-insurance agreement because of the down grading of their credit rating. The net impact of this will be that the next 3 to 4 years will show very strong growth in results for the captive with $2,250,000 being targeted for the ensuing 12 months.

Our cost ratios continue to compare very favourably with other approved deposit taking institutions (ADI’s) - particularly given that we have continued to maintain a policy of writing off all loan establishment costs at the time of originating the loan rather than capitalising over a 4 year period as is done by many other ADI’s.

These ratios include a Costs to Income ratio of 62.7% (2002/2003 - 60.7%), Cost to Average Assets ratio of 1.78% (1.68% - 2002/2003) and Return on Equity of 12.4% (11.4% - 2002/2003).

We continue to operate in accordance with the standards as laid down by our regulators, the Australian Prudential Regulation Authority. These standards address issues such as risk management. We have enjoyed a very good working relationship with that body.

We enjoy the support of a management team that has been with us for many years and this has enabled us to develop a culture that is very special to Wide Bay Australia. They are a dedicated, enthusiastic and experienced group who work well together as a team.

The staff share plan available to all of our staff continues to receive strong support and enables them to participate in the results of the Society and take an active interest in our operations.

I extend my personal appreciation to not only our senior management team but to all our staff for their support and enthusiasm throughout the year.

2004/2005 is promising to be a challenging year with reduced margins and a slowing housing market however I’m sure that with our expansion over the past few months and the initiatives we have in place that we will continue to produce strong results.

Yours faithfully,

RE HANCOCK
Managing Director
31st August 2004
Bundaberg

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MANAGING DIRECTOR'S REPORT 2003

With the on-going activity in the interstate housing market, flowing through to the Queensland market over the past 12 months, we have seen our loan approvals for the year reach $377.6 million – an increase of 23.8% over the previous year.

The increased market activity has however seen an increase in the amount of loan payouts and churning within the Industry and this has restricted the growth of the Society’s loan book for the year. Total loans outstanding on-balance sheet and under management total $1.014 billion - an increase of 7.94% over the previous 12 months. During the year, Management addressed this payout ratio and we have put in place various initiatives, which we believe will ensure a steady growth for the 2003/2004 year. In the first instance we have developed our range of products which has seen lending approvals in the past 5 months increase substantially. We have also moved to be part of the giroPost network, enabling our customers to access approximately 3,000 outlets across Australia. We have also undertaken other retention initiatives with regards to our existing loan portfolio.

With the increasing volume of business the Board of Directors recently approved our adoption of an electronic in-house computer system that will greatly improve our capacity and overall efficiencies - in not only processing loans but which will also enable us to attend to a significant amount of mortgage documentation in-house as opposed to our previous outsourcing arrangements. This will result in significant cost reductions. We anticipate being in a position to attend to mortgage documentation by the end of October and are planning to have the system fully installed by March 2004.

Our funding is provided by a mix of retail deposits from our branches which have shown an increase of 22% for the last 12 months and a securitisation program which has been in place with SG Australia for some years. It is anticipated that we will complete a further off-market securitisation program of approximately $250 million to $300 million in the December quarter. This will reduce the Society’s capital requirements.

Our capital adequacy now approximates 13% after our clearing all subordinated debt and the Resetting Convertible Preference Shares (RCP’s) purchases to date. We will continue to monitor our capital requirements.

In the current competitive environment we have been able to maintain our overall lending margin and anticipate this will continue in the ensuing year.

Legislation required credit providers from 1 July 2003 to adopt a standardised calculation of a comparison loan interest rate, which takes into account known fees and charges. Our comparison rates for our principal loan products reflect the benefits of our loans where no monthly account keeping fees or charges are applied and our rates compare more than favourably with our major competitors.

We are conscious of our cost ratios. In particular our cost to income ratio through the year was 60.7% (59.5% - 2001/2002) and our cost to average assets 1.68% (1.65% - 2001/2002). These figures compare very favourably with other building societies and regional banks and reflect the overall efficiency of the Society.

Our computer operations have shown an ever increasing demand for telephone and internet banking including on-line loan applications. With the recent introduction of giroPost our customers are provided with a very convenient and efficient means to conduct and transact their banking business – especially the increasing number of customers not living near our branch network.

We have been very conscious of providing a full range of products and services to our customers and this has been further developed with enhancements to our successful Customer Relationship Management system.

Our branches continue to contribute substantially to our operations - not only in retail deposits but also to the promotion of our related banking and finance products and in generating strong loans results.

During the year we extended our lending operations to Townsville and we have increased our representation in the Caboolture area, which services much of Northern Brisbane. We continue to focus on our interstate operations, especially in regard to loans. Melbourne and Adelaide particularly continue to show strong growth. While we are not heavily reliant on broker introduced loans, a small portion of our lending is sourced through selected brokers.

Our captive lenders mortgage insurer Mortgage Risk Management Pty Ltd now plays a major role in our operations, insuring all new mortgages. It has made a significant contribution to our results in 2002/2003 and having been in operation now for 5 years, I believe will contribute even further in the future. Our captive meets the Standard and Poor’s model for an “A” rated lenders mortgage insurer, which enables us to achieve a 50% risk weighting in respect of our housing loans for capital adequacy purposes.

A move to acquire a 51% interest some years ago in Wide Bay Capricorn Mini Lease Pty Ltd, has in some respects been challenging but we have now seen the business grow to the point where it should not only provide products for our customers but it is now at the stage of showing profitable results.

We are required to operate in accordance with the Prudential Standards as laid down from time to time by our regulatory authority the Australian Prudential Regulation Authority. These standards require Wide Bay to address various risk areas and we enjoy a very good working relationship with that body.

Our move to repurchase some RCP’s through the market as announced last December, has not been that successful with $1,291,874.10 only being able to be acquired to date. This is a reflection of the support this issue received from the investing public. We will continue to pursue this share buy-back.

Our Management Team are a dedicated, enthusiastic and experienced group who work well together. Many of our Senior Managers have now been with us for several years and this has enabled us to develop a culture special to the Society. The Staff Share Plan applicable to all of our staff continues to receive strong support and enables all staff to take an active interest in the operations and results.

I would extend my personal appreciation to not only our Senior Management Team but all the staff for their enthusiasm and support throughout the year.

While the past year has again been challenging, I am sure the initiatives and developments that we have achieved over the year and that are in place for the ensuing year, will see not only a strong lending program but enhanced trading results.

Yours faithfully,

RE HANCOCK
Managing Director
13th August 2003
Bundaberg

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MANAGING DIRECTOR'S REPORT 2002

Wide Bay Capricorn’s strong growth in both asset size and loan approvals has provided the basis for another record performance in 2001/2002.

We experienced strong growth in interstate lending, particularly Sydney and Melbourne, and while that market appears to be slowing somewhat we are anticipating another strong contribution from interstate in the ensuing 12 months.

There has certainly been an increase in housing activity in the Queensland market particularly the south-east sector with this now flowing through to the provincial areas of Queensland and being reflected in our branch lending performances.

The growth in our assets and loans under management to $1.177 billion, an increase of 15.21% over the 2001 financial year, has been funded both by growth in retail deposits and through our access to a strong securitisation program through SG Australia. This securitisation program involves a warehouse facility that we are able to access as required from month to month for both operational and liquidity funding purposes. The warehouse is cleared from time to time and it was only recently that we issued $235 million of paper to the market generally.

While we are able to use securitisation for funding - growing our on-call and term retail deposits through our branch network remains very important to our operations.

At the same time as experiencing growth in our assets, we have been able to maintain a steady margin, allowing this growth to flow to our overall profit. It is anticipated that we will be able to maintain this situation in 2002/2003.

With the current speculation regarding a possible increase in interest rates we do not envisage a great impact on our overall operations, given that rates are currently at an almost all time low. It is interesting to note that a very high percentage of our loan portfolio is in advance with their repayments. This is because as interest rates and the consequent required monthly repayments were falling, many of our borrowers elected to maintain their payments based on the higher interest rates.

We have always endeavoured to maintain a competitive position in the market place and this has been reflected in the figures we have achieved through the year. We have endeavoured to contain our fees and charges and still do not charge a monthly account-keeping fee to our borrowers. While we levy various transaction and service fees, we attempt to maintain these at a level below our major competitors.

During 2001/2002, we were very conscious of our cost ratios. Our cost to income has improved to 59.5% (61.5% - 2000/01) with our cost of average assets 1.65% (1.7% - 2000/01). These figures represent the overall efficiencies within the organisation and compare very favourably with other larger building societies and regional banks. We continue to target these cost ratios, while at the same time ensuring that we do not suffer through a lack of service and facilities.

Our computer operations, under the management of Ian Pokarier, provide an excellent service for our branch network and Head Office administration. Ian and his

Team is constantly looking to ensure the speed of transactions and our capacity to handle new enhancements.

The past year has seen quite surprising growth in electronic banking with our staff reporting positive comments on the ease of using facilities such as our Website, Internet and Telephone Banking and BPAY.

We constantly review our range of products and services to ensure that we offer the broad cross section to our depositors, borrowers and clients generally that one would expect from a ‘community banking’ structure.

Our branches remain our main source of business. Our Business Development Team are constantly reviewing locations and positioning of our existing branches. We have recently relocated our branch at Caboolture, which now offers a very attractive spacious facility, have opened another branch in Mackay and are currently investigating other opportunities including Townsville.

Our Management Team has worked together for many years now. One of the benefits of being located in a provincial city such as Bundaberg is that there is greater stability and continuity of employment allowing us to develop this Team who are experienced in a broad range of responsibilities.

We have our own internal staff training personnel and all our staff visit our Head Office regularly for training – covering our systems, product and service enhancements or general refreshing of knowledge. We believe this not only develops greater quality of service at the branches, but is very important in establishing a team working together through our total area of operations.

From a management point of view, the past year has been very challenging with market competition and the introduction of new structures. At the same time it has been very interesting and satisfying. A huge amount of effort was involved in the issue of $35 million of Resetting Convertible Preference Shares - particularly with myself and the Executive Manager and our Team.

All insurance companies were required to resubmit for reauthorisation by 30 June 2002 and while the reauthorisation process for our captive mortgage insurer was also challenging it is again pleasing to note that this was achieved.

Possibly the most significant achievement during the year was the issuing of an off balance sheet securitisation program in August for $235 million. This form of funding releases capital that is normally required under the capital adequacy ratios and prudential standards as laid down by the Australian Prudential Regulation Authority (APRA). It is the intention that future securitisation programs will continue to be off balance sheet. This will give us the opportunity in the next few months of working with the Board and reviewing our Capital Management Plan for the ensuing years - deciding whether we have excess capital and what action is best suited. It certainly will ensure that our capital requirements are catered for over the next few years.

Finally I would like to extend my greatest appreciation to the Management Team with whom I work - a very dedicated, enthusiastic and experienced group - and to our Staff in general - whose enthusiasm and commitment forms part of the Wide Bay culture. They have always been one of the strengths of Wide Bay Capricorn.

Next year will again be competitive, but as they have in the past I am sure that our Team will handle these challenges.

Yours faithfully,

RE HANCOCK
Managing Director
5th September 2002
Bundaberg

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MANAGING DIRECTOR'S REPORT 2001

It is with great satisfaction that I take this opportunity of providing an overview of the Society’s operations for the year 2000/2001.

The strong growth in our assets of approximately $470 million at 30 June 1996 to assets and loans under management at 30 June 2001 of $1.022 billion has been the springboard for the Society’s achievements. A large percentage of this growth has been funded through our securitisation program with SG Australia Limited, which has enabled us to achieve this growth without developing a large high cost network of additional branches and agencies. We have continued to focus very strongly on our branches and agencies and the services and facilities offered. They continue to be the core of the Society’s operations.

Our move interstate, particularly in relation to our lending operations, has proven very successful with strong figures experienced in Melbourne, Sydney and Adelaide. During the year an additional amount of $162.4 million was funded through our securitisation program and warehouse facility with SG Australia Limited.

Our lending for the year of $249.2 million, while down marginally on previous years was, given the impact of GST and the economy generally, quite a satisfactory result. I expect to see this figure increase this year.

Wide Bay Capricorn’s strong growth over the years, together with our containment of costs has seen efficiency ratios at the lowest levels ever. Our cost to income was 61.5%, which outperforms most of the building societies sector and is more than comparable with many of the regional banks. Our cost to average assets at 1.7% is another major achievement.

During the year we saw our more recent products widely used, in particular Telephone Banking, BPAY, our website and Internet Banking. We have received many compliments in respect to the development of our website under the supervision of our Computer and Operations Manager, Mr Ian Pokarier. The introduction of our MasterCard in conjunction with Citibank has also proven a success and is now widely used. Our financial planners continue to expand their operations and I anticipate substantial growth in that area of our operations for the coming year.

We have acquired a 51% equity in a small lease and rental operation and will be using that acquisition to establish the benefits, disadvantages and market potential to perhaps expand that product further, providing an additional service to our customer base.

There has been an increasing trend over recent years for financial institutions to promote their range of services to customers in a much more focused environment. We are currently in the stages of introducing a new customer service facility, which will provide an expanded database of our customers’ use of products and services and assist our customer service staff in promoting our products. When operational we expect to see substantial financial benefits flow to the Society as well as improved service.

Our lenders’ mortgage insurance captive continues to perform well and we are very pleased with the level of claims experienced to date.

We have almost completed the development of our on-line loan facility and within the next few weeks expect that borrowers will be able to apply direct through the Internet for one of our various home loan products.

We continue to monitor and review our fee structure. We have adopted the principle of “user-pays,” where the high cost of many of these services and transactions we now offer, are passed on to the actual user rather than subsidised from interest income, where we are continually battling to maintain our margin. While introducing costs and charges we do make a very conscious effort to ensure that our charges are below that of our major competitors.

Our shares have traded steadily on the Australian Stock Exchange, although at times there have not been a large number of sellers. This is no doubt a reflection on the dividend paid last year of 22 cents, which has now been increased to 27.5 cents fully franked for the current year.

Our operations are now supervised and regulated by the Australian Prudential Regulation Authority (APRA) and I believe this has been a most beneficial move providing stability for the Industry and confidence to our customers. They ensure compliance with a wide range of standards and procedures.

The ensuing year will see the Society under further pressure in meeting new legislative requirements, in particular the Privacy Act and the Financial Services Reform Bill scheduled to be introduced this calendar year - as is new Uniform Stamp Duties Legislation. Whilst these Bills will place pressure on the Society and other organisations to comply, they are being introduced after a great deal of consultative discussions and submissions. We are particularly concerned at the possibility under the Financial Services Reform Bill of our base core products, such as term deposits, not being excluded from this legislation. We have in place various committees reviewing the requirements and obligations under the proposed changes.

During the year we attended the Australian Finance Conference meetings as members. We are most impressed with the facilities and services available for a wide range of administrative and legislative issues.

The Society has always focused on customer service and relationships and all staff attend our Head Office regularly for in house training to ensure their capabilities with computer systems and new products.

While we are directed and guided by a very successful Board of Directors, there is no doubt in my mind that one of the Society’s real strengths is our Management Team, particularly Senior Management, the attitude they display and the enthusiasm and commitment that they apply.

I extend my personal appreciation to them for their support and assistance and also to all of the staff throughout our total operation. I am very confident that Wide Bay Capricorn will produce another strong year for 2001/2002.

Yours faithfully,

RE HANCOCK
Managing Director
11th September 2001
Bundaberg

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MANAGING DIRECTOR'S REPORT 2000

It is indeed a pleasure to provide an overview of the Society's operations for the year 1999-2000.

The immediate challenge for the year was the Y2K roll over, which required a large amount of planning and testing from our Computer and Administration personnel - as well as ensuring that all of our associated suppliers, in respect of EFTPOS, ATM's etc, would not interfere with the Society's operations on changeover. Fortunately the roll over occurred without any problems and one can only wonder whether the large amount of resources and funds deployed in that roll over were in the end warranted.

Our year's activities have been underpinned by strong lending figures, supported by our interstate operations of Melbourne in particular, Sydney, and Adelaide. Our lending figures of past years, have been the springboard for the growth in the Society and the maintaining and improvement of our profit results. Our loans approval for the year amounted to $257.28 million compared to $175.13 million for the previous financial year.

Our assets, because of the strong growth in loans, have also increased substantially, closing the year at $923.9 million an increase of 24.63% from the previous year. With our growth in lending, we have sourced the funding from our traditional retail deposits through our branches and agency network and during the year expanded our securitisation programme that was commenced in June 1997, with the assistance and support of SG Australia Limited.

During the year an amount of $231.9 million was drawn down through a securitisation programme and a warehouse facility established with SG Australia Limited. In August the Society completed a public issue of Wide Bay Capricorn paper into the capital markets, which was strongly supported by institutional investors. This placement comprised higher loan to valuation ratios and was the largest placement of its type issued in the financial markets at $197.2 million. Our experience gained and the association developed with SG Australia Limited has enabled us to have in place a strong securitisation funding programme which will meet our funding requirements over and above our retail deposits for the foreseeable future.

Our growth in assets has been achieved without any major branch and agency development and this has tended to contain our costs and improve our operating ratios.

The Society has always performed well in the KPMG annual survey of building societies throughout Australia and again this year we achieved the following placements in that survey:
Total Assets - 6th;
Increase in Total Assets - 3rd;
Return on Total Assets - 2nd;
Return on Shareholder Equity - 2nd;
Profit after Tax - 4th;
Operating Expense/Avg Total Assets - 4th and
Cost to Income - 2nd.

Our cost to income ratio and cost to average assets, continue to perform well and our sustained growth will see those figures improve.

The establishment of our own lenders mortgage insurance company early in 1999 has seen us insure completely our lending programme for 1999/2000 with that captive, Mortgage Risk Management Pty Ltd. To date the performances of the fund have been excellent and as premiums are progressively allocated to income, this captive is expected to contribute substantially to our annual results. The operation of the captive is supervised by experienced managers in that field and experienced personnel are in place at Head Office to overview loan approval processing and arrears administration.

Changing technology has provided many challenges, particularly to our Computer Department and our Manager, Mr Ian Pokarier has been active in ensuring that we maintain our presence and competitiveness with the provision of services such as telephone banking and recent developments in hand of internet banking and our own website. We are scheduled to join the BPay network within the next month and this will provide a complete range of facilities complementing our already well established ATM, EFTPOS network. Plans are in hand to introduce a MasterCard, currently scheduled prior to the end of this calender year. Our investment in QSI Payments, Inc. as mentioned in our previous report was increased during the year and the prospects for the Society, with that company's association now with Goldman Sachs, and planning for a NASDAQ listing, are very promising.

Our general products continue to expand, with Widecover Insurance receiving exceptional support and our financial planning arm now fully operational in Bundaberg and the North Coast, with representatives scheduled for the rest of our branch network during this financial year. Our Thomas Cook Agency is operational. Medibank Private is well used by our members and we continue to monitor and broaden our range of loan products, at the same time maintaining our long standing policy of only lending where there is appropriate residential accommodation security and the loan is fully insured with a Lender's Mortgage Insurance company, ensuring that we have minimal bad debt write offs throughout the year.

Our fee structure is carefully monitored and varied and we are adopting the principle of "user-pays" where the high cost of many of these transactions is passed onto the actual user, rather than subsidised from interest income where the margin is continually being eroded through the market forces and competition in those markets. We endeavour at all times to ensure that we are substantially less than the major banks and other financial institutions providing a competitive edge to the Society.

We have complied with the requirements under the transitional provisions for the transfer from the Australian Financial Institutions Commission (AFIC) to the Australian Prudential Regulation Authority (APRA). We have adopted a new set of rules and constitution, which conform with Corporations Law and are consistent with other listed companies throughout Australia.

Our trading on the Australian Stock Exchange is steady, although at times there are not a large number of sellers. This year we paid a divided of 22 cents per share fully franked. We do receive strong support from our brokers and some larger shareholders.

The Society has always been focused on customer service and relationships and we continue our strong in-house training whereby all levels of staff visit Head Office on a regular basis for training, ensuring their capabilities with new products and our computer systems.

Whilst the success of any organisation is firstly at the direction of the Directors, total success relies on the capabilities and contributions of the staff, particularly the senior staff. In that regard we are very fortunate that our senior staff, apart from being enthusiastic and dedicated, in most cases have been with the Society for many years and conscious of their responsibilities. They have been significant players in the successes we have achieved to date and I extend my personal appreciation to them for their support and contributions.

The Society is now well placed to maintain a focused presence throughout our branches and agencies and will continue, in particular through products, services and facilities, to endeavour to be recognised as a community bank, playing a major role where we are represented with our branches and agency network.

1999/2000, whilst being at times a very hectic year, has been very satisfying and I am sure 2000/2001 will continue to show increased performances.

Yours faithfully,

RE Hancock
Managing Director
7th September 2000
Bundaberg

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