PSSap Fund Performance for January 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
January 2007 (% )

This table below shows the actual asset allocations of the four pre-mixed investment options at the end of January 2007. The other seven options are essentially single strategy options - see our product disclosure statement .

Asset Class	Conservative	Balanced 50/50	Trustee Choice	Aggressive
Cash	21	2	7	2
Bonds/Fixed interest	49	38	10	0
Market neutral strategies	0	10	10	8
Total Defensive Assets	70	50	27	10
Australian shares	16	20	33	43
International shares	10	13	23	30
Property	4	12	12	12
Long/Short equities	0	5	5	5
Total Growth Assets	30	50	73	90
Total	100	100	100	100

Table 2: Performance in 2006-07 as at end January 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 seven months of the current financial year until the end of January 2007.

Investment Option	Financial Year 2005-06	7 Months to end January 2007
Conservative	7.7	5.9
Balanced (50/50)	10.2	7.5
Trustee Choice	14.3	9.8
Aggressive	16.1	11.9
Cash	4.6	3.0
Bonds/Fixed interest	2.0	2.7
Australian shares	22.3	14.0
International shares (unhedged)	17.8	10.7
International shares (hedged)	15.4	14.3
Property	11.7	10.7
Sustainable	19.0	13.0

Commentary:

Global equity markets began 2007 in the same vein as they ended 2006, with solid rises achieved in most countries. Equity market performance continues to benefit from robust investor risk appetite, expectations that US short term interest rates have peaked, a decline in the oil price, continued strong corporate profit growth and heightened takeover activity. In the month of January, the US economy displayed further signs of economic strength with the housing market appearing to stabilise, December quarter real GDP growth revised up and the labour market exhibiting on-going strength. The Australian equity market matched the return of its global counterparts in January, thereby ensuring its modest outperformance in the first seven months of this financial year. However, a rise in the Australian dollar during this period meant that the relative underperformance of unhedged global equities was larger.

Global fixed interest markets were again weak in January, with returns only marginally positive and well below those from cash. This reflected stronger economic growth numbers in the US, which led to a small rise in long-term bond yields in a number of countries. In the first seven months of this financial year, Australian bonds significantly underperformed their global counterparts. During this period, Australian 10 year bond yields rose by 0.15%, while US 10 year yields declined by around 0.3%. This financial year has also seen the Australian dollar rise modestly against most currencies and by a more significant 10% against the Japanese Yen. The weakness in the Yen has been due to a slower than expected pick-up in Japanese economic growth. The rise in our currency did not impact the return of the diversified options, including Trustee Choice, as all overseas investments are hedged into the Australian dollar.

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

Steve Gibbs
CEO
2 March 2007