PSS Fund Performance for October 2006

• 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 October 2006 (%)

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

The return numbers in the table below are after fees and before tax, except for the Total Fund return number which is after both fees and taxes. Benchmark numbers are before fees and taxes.

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

Table 3: Historical Fund Returns over the last 5 years (% p.a.)

* unaudited

Commentary:

Global equity markets rose strongly in the month of October, following impressive gains in the September quarter. In the four months ending October, equity market performance benefited from a healthy risk appetite amongst investors and a perception that the US economy would experience an orderly reduction in the pace of economic growth, thus eradicating the need for further short-term interest rate increases. Additional impetus was provided by a sharp decline in the oil price, continued strong corporate profit growth and heightened takeover activity. The Australian equity market also rose strongly in the four months to the end of October, due to robust corporate profit growth and an increase in takeover activity.

In the first four months of this financial year, global fixed interest markets benefited from a perceived peak in US short-term interest rates. This resulted in US 10 year bond yields declining by a little over 0.5%, thus fuelling capital gains which resulted in bond market returns comfortably exceeding those from cash, albeit below those recorded by equity markets. By way of contrast, the Australian bond market achieved returns below cash in the four months to the end of October. The more subdued domestic bond environment reflected a pick-up in inflationary pressures and associated increases in short-term interest rates.

The Fund’s after tax and fees return for the four months ending October was 4.7%. While strong in an absolute sense, the return was below benchmark, due to underperformance from a majority of our active managers.

PSS Cash Investment Option  

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

 Table 5: Historical Fund Returns (%)  

*unaudited

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
23 November 2006