PSS Fund Performance for April 2007

• PSS default Fund
• PSS Cash Investment Option

Welcome to the monthly update on your Fund's investment performance.

The impact of investment performance on your final benefit varies from minimal (if you are a contributing member) to significant (if you are a preserved benefit member) or if you have transferred amounts from other funds. However, all members may find it useful to understand how your fund performs.

ARIA’s primary responsibility is the management and investment of the PSS Fund in the equitable and best interests of all members. ARIA approaches this task by setting an investment objective to maximise the real returns earned on investments subject to a tolerable level of short-term volatility.

PSS default Fund

Table 1: Asset Allocation as at end April 2007 (%)

Table 2: The PSS in 2006-07 as at end April 2007 (%)

The Fund return numbers for each asset class in the table below are after fees and before tax. Two total fund return numbers are shown; the first is after fees and after tax (the return investors receive), while the second is after fees and before tax (the return that should be used when comparing the total fund return to the total fund benchmark return). Benchmark return numbers are before fees and before tax.

The asset class benchmark return numbers show the market performance of the sector, while the asset class fund return numbers show what your Fund's performance was in that asset class sector.

* after fees and after tax;  * * after fees and before tax

Table 3: Historical Fund returns over the last five years (% p.a.)

Commentary:

Global equity markets had a great start to the second quarter of 2007, with many markets either hitting  or approaching their all-time highs. Contributing factors included a continuation of merger and acquisition activity, strong corporate earnings results and benign economic data. The Australian market performed strongly again in April and was up 3.0%, celebrating the ninth consecutive month of positive returns. The best performing sectors were Financials, Consumer Discretionary and Industrials. International equities rose by 3.3% in hedged terms, but the continued strength in the Australian dollar meant that the return to unhedged investors was only 1.5%. While many major markets posted strong gains in April (e.g. both Europe ex UK and the USA were up more than 4%), it was the Shanghai Stock Composite Index in China that produced the most spectacular return of 20.7% on the back of better than expected growth data.  Financial year to date performance by major equity markets remains very strong. During this period, the Australian market rose by 26%, compared with 21% from hedged international equities. However, a solid rise in the Australian dollar eroded the returns from unhedged international equities to just 8.5%. Amongst the developed markets, the strongest gains in the 10 months ending April were achieved by Singapore (up by 46%), Sweden (up by 39%), Denmark (up by 37%) and Germany (up by 32%). The US managed a respectable return of 19%, while Japan rose by just 11%.

In April, all major central banks (US FOMC, Euro ECB, UK BoE and Japan BoJ) left their local cash rates unchanged, although they acknowledged their concerns over the risk of higher inflation. While the credit sector outperformed due to solid earnings data, the woes of sub-prime mortgages continued to affect the US Asset-backed securities sector. Global bonds returned 0.4% in April, underperforming the return from both cash (up 0.55%) and Australian bonds (up 0.7%). The local bond market was held up by the RBA’s decision to keep the cash rate unchanged and the relatively low March quarter CPI number. In the 10 months to the end of April, Australian bonds (up 4.4%) underperformed cash (up 5.3%). However, international bonds (up 6.6%) fared better.  The Australian dollar rose again in April, reaffirming the trend evident in the earlier part of this financial year. The rise in our currency has not impacted the Fund’s returns as all overseas investments are hedged into the Australian dollar.

The Fund’s after tax and fees return for the ten months ending April was 14.8%.  On an after fee but before tax basis, the return of 16.1% was somewhat below the benchmark return of 16.5%, reflecting modest underperformance from our active managers.

PSS Cash Investment Option  

Table 4: The PSS Cash Investment Option in 2006/2007 as at end April 2007 (%)  

The fund return in the table below is after fees and tax, whereas the Benchmark return is before fees and tax.

 Table 5: Historical Fund returns (%)  

Commentary:

The Cash Investment Option continues to deliver returns in line with the benchmark return, once account is taken of fees and taxes.

Steve Gibbs
CEO
15 June 2007