Document Sample
THE INVESTMENT Powered By Docstoc
					           ANU                  INDEX
1 year               11.3            11.5
5 years               6.8             0.6
10 years             10.3             7.6

                                                                                                                                               in Japan. The US Federal Reserve kept the official cash rate
                                         OVERSEAS EQUITIES PERFORMANCE
                                                                 (Annualised)                                                                  on hold at 5.25% after July 2006. The European Central
                                                    for periods ended 31 December 2006
                                                                                                                                               Bank raised rates by five 0.25% increments to 3.5%. The
                                                                                                                                               Bank of Japan raised its official cash rate to 0.25% in 2006,
           PORTFOLIO COMPOSITION                                                                                                               the first move since 2001, in the wake of positive inflation
                                ANU                 Mercer Pooled Fund Survey                  ANU                                             data and signs of more sustainable economic growth. The
           Equity (D
             6.0                         40.20          37.10                                                                                  RBA in Australia increased rates from 5.5% to 6.25% in
                                                                                                                                                                                                               THE INVESTMENT
           Equity (O                     20.30          28.10
           Fixed Inte                    11.10          11.90
           Fixed Inte                      0.00          5.90
                                                                                                                                                                                                                 ADVISORY COMMITTEE

           Indexed B
                                           0.00          1.00                                                     International equity markets performed strongly in 2006
           Direct Pro               1 year 0.00          0.50years
                                                            5               10 years
                                                                                                                  with the price indices increasing 15.2% in the US (S&P500),
           Listed Pro                      5.90          8.20          NOTE
           Alternativ                      6.40          2.50
                                                                                                                  25.5% in Germany (Dax), 10.4% in the UK (FT100) and 7.9% in
                                                                       2006 graph adjusted for flier - Indexed Bonds 1.0 deleted
           Other                         16.10           4.80                                                     Japan (ND). The appreciation of the Australian dollar during
                                       100.00          100.00
                                                                                                                                               the year tempered these returns to unhedged Australian          investment performance summary
                                                                                                                                               investors. The domestic equity market price index increased
                                                                 ASSET ALLOCATION
                                                                      as at 31 December 2006                                                   22.8% (ASX/S&P300). Bond markets provided low returns
                                                                                                                                                                                                               for year ended 31 december 2006

                                                                                                                                               to investors in 2006 in Australia and overseas.




                                                                                                                                               The ANU remained positive on the prospects for financial

                                                                                                                                               markets through 2006.         The preferred sectors were        INTRODUCTION


              15.0                                                                                                                             equities, property and alternative investments such as

                                                                                                                                               infrastructure and private equity. The asset allocation         The strategic goal of the ANU is to advance





                                                                                                                                               adopted for the LTIP reflected this positive outlook. Whilst    knowledge through excellence in research,

                      Equity (Domestic) Equity (Overseas)   Fixed Interest      Fixed Interest   Listed Property    Alternative      Other
                                                             (Domestic)          (Overseas)                        Investments
                                                                                                                                               the overweight exposure to the resources sector led to slight   education and community engagement. The
                                                                                                                                               underperformance by the domestic equity portfolio against
                                                         ANU              Mercer Pooled Fund Survey

                                                                                                                                               the benchmark, the solid performance from this portfolio
                                                                                                                                                                                                               philosophy embedded in this goal is reflected
           ASSET ALLOCATION                                                                                                                    nonetheless highlighted the strong overall stock picking        in the active internal management of the
                                                                                                                                               practices of the ANU. The University’s higher than average      University’s financial assets, which aims to
           The asset allocation at 31/12/2006 compared to the average                                                                          weighting to the strongly performing domestic equity sector     maximise returns to support the achievement
           exposure in the MPFS is provided in the above chart. The                                                                            also contributed to the total LTIP outperformance.
           ANU maintained a higher exposure to domestic equities,
                                                                                                                                                                                                               of this goal. The assets are managed by the ANU
           AI and cash and a lower weighting to overseas equities,                                                                             During 2006 exposure to overseas equities and AI was            Investment Office (IO) under advice from the
           fixed interest and listed property than the market.                                                                                 increased. At 31/12/06 the allocations to the various           Investment Advisory Committee (IAC), which is
                                                                                                                                               investment categories were as follows: domestic equities        made up of senior industry professionals and
           MARKETS AND STRATEGY IN 2006                                                                                                        40.2%, overseas equities 20.3%, listed property 5.9%, fixed
                                                                                                                                                                                                               academic experts. The IAC reports to Finance
                                                                                                                                               interest 11.1%, alternative investments 6.4% and cash/
           Economic growth was stronger than predicted in most                                                                                 other 16.1%. The high weighting in cash reflected the low       Committee (FC) and ultimately the governing
           major economies in 2006. The US grew by 3.1%, Europe                                                                                weighting in fixed interest (due to low bond yields) and the    Council.
           by 3.3%, the UK by 3.0%, Japan by 2.3% and China by                                                                                 cautious approach to increasing AI exposure. The medium
           10.7%. Inflation was lower in the US, Europe and China,                                                                             term strategic target for AI was increased to 20% during
           was higher in the UK and Australia, and remained very low                                                                           the year.

                                                                                                                                                                                                               INVESTMENTS OFFICE

     0606023CPAS_Shell.indd 1                                                                                                                                                                                                                         29/6/06 2:49:43 PM
       INVESTMENT OBJECTIVE                                                     MANAGEMENT OF FUNDS
       The ANU Investment Objective is to obtain the maximum                    The ANU maintains a professionally staffed IO. The IO                                       Strong Individual Sector Performance: The ANU
       possible long term return on available capital consistent                is responsible for the day-to-day management of the                                         domestic equities portfolio provided an excellent
       with achieving a minimum return to the ANU of CPI plus                   funds and for preparing the investment strategy and                                         absolute performance of 22.8% in 2006. This was the
       5.5% over rolling 5 year periods and ensuring a negative                 other asset allocation and investment policy papers for                                     third year of 20% plus returns. Listed property had an
       annual real return occurs less frequently than once                      consideration by the IAC.                                                                   outstanding year with the ANU portfolio returning
       every 6 years on average. Over the shorter term, it is                                                                                                               35.3%. Overseas equities achieved a solid 11.3% while
                                                                                The IAC was established in 1968 to review the management
       recognised that there will be periods when investment                                                                                                                alternative investments (AI) also provided a strong 13.6%
                                                                                and financial performance of the ANU’s investment
       returns do not meet this objective. Accordingly the ANU                  operations, to advise on investment policy and to report                                    return. The ANU was underweight the poorly performing
       should also aim to achieve returns (after fees & tax)                    to FC. The IAC held four meetings during 2006.                                              fixed interest sector but its own portfolio returned 5.0%,
       that are in excess of the median return of other funds                                                                                                               which was significantly above the index for this sector.
       with comparable risk and return profiles as measured by                  Membership of the IAC comprises the Vice-Chancellor,
       independent industry surveys over 3 year periods. The                    the Chair of FC, the Chief Finance Officer & six persons                                    Strong Long-term Performance: MPFS data indicates
       portfolio will contain sufficient liquid assets to pay the               with expertise in finance and investments. The six                                          strong long-term performance for the LTIP (1/29 for 5
       financial obligations of the LTIP, including those relating              specialists in 2006 were Emeritus Professor Allan                                           yrs & 1/21 for 10 yrs), the domestic equities portfolio
                                                                                                                                                                            ANU       INDEX
       to the Commonwealth Superannuation Scheme, as they                       Barton (Chair), Mr Tim Crommelin (Executive Chairman 1 year                                                          fixed interest portfolio (2/35
                                                                                                                                                                            (13/74 & 3/34) and the DOMESTIC EQUITIES PERFORMANCE &
                                                                                                                                                                                22.80     24.50

       fall due.                                                                Stockbroking ABN Amro Morgans), Professor Tim 5 years                                           18.10
                                                                                                                                                                            3/21).        15.40
                                                                                                                                         10 years                               17.20     13.10
                                                                                Brailsford (Head of School of Business at University of
       FUNDS UNDER MANAGEMENT                                                   Queensland), Professor Ross Garnaut (Head, Economics                                                           DOMESTIC EQUITIES PERFORMANCE
                                                                                Program RSPAS), Mr Jim Service (Managing Director JG                                                                               (Annualised)
                                                                                                                                                                                                      for periods ended 31 December 2006
       The University’s realisable investment assets at 31/12/06                Service Pty Ltd) and Mr Robert Ferguson (various senior                                      25.0

       were $1,247.3 million of which $1,047.1 million was                      executive roles) who joined the IAC in June 2006.

       invested through a balanced fund known as the Long
       Term Investment Pool (LTIP). The LTIP held exposure in                   INVESTMENT HIGHLIGHTS FOR 2006                                                               15.0

       all the major asset classes. The remaining funds are                                                                                                                                                                                                 INDEX

                                                                                2006 Return: The return in 2006 was 16.4% (post

       $95.0 million of a Commonwealth Capital Grant, $65.0
                                                                                the management expense ratio (MER) of 0.15%). The
       million from a Capital Raising earmarked for capital

                                                                                benchmark return, the median return of the Mercer
       improvements and $40.2 million of Other ANU funds.                       ANU POST TAX (AS ADVISED BY MERCER)                                                           0.0
                                                                                Pooled Funds Survey (MPFS), was 14.6% (after taxes &
                                                                                ANU (less tBenchmarkANU (less
                                                                                                                                                                                          1 year                   5 years                   10 years

                                                                                                                                                                            ANU         INDEX                     DOMESTIC FIXED INTEREST PERFORMANCE
                                                                     3 years    fees). The ANU return (after MER and an assumed tax rate 1 year
                                                                                    17.50      15.30   17.50
       Unit holders in the LTIP include the ANU Superannuation       5 years        11.60       8.90   11.60
                                                                                                                                                                                    5.0      3.1                  for periods ended 31 December 2006
                                                                     10 years   of 7.0%) was9.00
                                                                                    11.20                which
                                                                                                 15.2%11.20 ranked 10/31 in the MPFS.    5 years                                    6.3      5.5
       Reserve Account, ANU Endowment funds and the Long                                                                                                         10 years           7.0      6.5
       Service Leave Fund. The LTIP is administered in the same
                                                                                                                                                                                           DOMESTIC FIXED INTEREST PERFORMANCE
                                                                                                                                                                                         LOCAL FIXED INTEREST PERFORMANCE
       manner as a commercial unit trust with unit holders                                          TOTAL FUND PERFORMANCE
                                                                                                                 (Annualised)                                                                                     (Annualised)
       buying and selling units at market value. Distributions                                      for periods ended 31 December 2006                                                                  for periods ended 31 December 2006
                                                                                                                                                                                                   for periods ended 31 December 2005
       are made on a quarterly basis. The ANU charges a central                  20.0
       administration levy on all funds, apart from Endowment                                                                                                                7.0
                                                                                 15.0                                                                                        6.0
       funds. The distribution rate for 2006 and 2007 is 6%.                                                                                   ANU (less tax
                                                                                                                                               and MER)

       The variation between the distribution rate and the                       10.0
                                                                                                                                               Benchmark (less
                                                                                                                                               tax and fees)

       actual returns is reflected in the LTIP unit price.
                                                                                                                                               ANU (less MER)
                                                                                  5.0                                                                                         2.0
                                                                                  0.0                                                                                         0.0         1 year                  5 years                  10 years
                                                                                          3 years              5 years              10 years                                              1 year                  5 years                   10 years

0606023CPAS_Shell.indd 2                                                                                                                                                                                                                                29/6/06 2:49:45 PM

Shared By: