PSSap Fund Performance for April 2007

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

ARIA’s primary responsibility is the management and investment of the Fund in the equitable and best interests of all members. ARIA approaches this task by setting investment objectives for the Fund's investment options that maximise the real investment returns earned subject to tolerable levels of short-term volatility for each option.  

Table 1: Asset allocations for pre-mixed investment options as at end April 2007 (% )

This table below shows the actual asset allocations of the four pre-mixed investment options at the end of April 2007. The other seven options are essentially single strategy options - see our Product Disclosure Statement .

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

The figures in the following table are after tax and fees.  The first column shows performance for the 12 months ending June 2006.  The second column shows the return for each option for a member who was invested for the whole ten months of the current financial year until the end of April 2007.

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.

Option returns in the first 10 months of this financial year remain very strong, with investors rewarded for taking risk.  Options with a heavy equity emphasis, particularly Australian equities, achieved the highest returns. A rise in the value of the Australian Dollar eroded the returns from unhedged international equities.  The Bonds/fixed interest option has suffered from subdued returns in global fixed interest markets  

Steve Gibbs
CEO
15 June 2007