NEWS
Investment market update

HOW DID THE COAL INDUSTRY SUPER FUND COMPARE?

The Coal Industry Superannuation Fund continued to deliver competitive investment returns for the accumulation and pension section of members benefits, with its investment returns performing better than, the market average over the 2009/10 year.

The past year has been a difficult year for investors with heightened levels of volatility and negative returns in the Australian shares, overseas shares and listed property sectors.

The CISF ranked 6th out of 18 when compared with similar growth managers in the Intech Growth Manager survey.  The median manager return was 11.2% compared to the CISF
11.5%.

In addition to the out performance over the last year the CISF has also performed above average over the last three years.  The median growth manager return over the last three years was -4.8% compared to the CISF -3.5% which ranked CISF 2nd in the same survey.

Note: Returns are after tax and investment fees.

Over the last 5 years the Funds earnings and returns to members are as follows:-

INVESTMENT MARKET UPDATE

Positive returns for the 12 months to 30 June 2010

After a challenging 2007/2008 and 2008/2009, investment returns for the 2009/2010 financial year provided some respite, with 12 month returns in most asset classes being positive, above inflation and in the case of shares double digit.

As the year progressed there was a noticeable shift in investor behavior from one of optimism and confidence to one of aversion and uncertainty. During the June quarter there was a sharp pullback in share markets.

In light of this, the Coal Industry Superannuation Fund achieved a return of -4.3% over the three months to 30 June 2010, taking total earnings for the 2009/10 financial year to +11.5%. In line with the Trustee’s policy to smooth investment returns, the crediting rate to members was +10.0% for the year, which has increased the Fund’s reserves. The higher reserves mean that higher returns can be credited should markets fall.

The Fund has out-performed the average fund manager return of -4.8% over the three months to 30 June 2010 and +11.2% for the 2009/10 financial year.

Note: Returns are after tax and investment fees.

Australian shares: -11.2% for the quarter and +13.1% for the year

Most sectors achieved negative returns over the quarter as investor confidence fell and uncertainty increased. The Industrials (-18.9%), Financials (ex-Property Trusts) (-15.1%) and Consumer Discretionary

(-12.2%) sectors were the weakest performing.

Over the year, the best performing sectors included Financials (ex-Property Trusts) (+17.2%), Consumer Staples (+15.8%) and Materials (+15.6%).

Overseas shares: -4.8% for the quarter and +5.2% for the year (on an Australian dollar basis)

In local currency terms, share markets in all of the major regions declined during the quarter. Japan (-14.8%), UK (-12.7%) and North America (-11.2%) experienced the largest falls.

The return of +5.2% for the year (on an Australian dollar basis) was reduced by the strengthening of the Australian dollar. If the impact of currency is ignored, overseas shares returned +11.2% for the year to 30 June.

Other investment markets

Australian listed property (-1.5%) lost value during the quarter but out-performed Australian shares as investors were driven to the more defensive Property Trusts. Direct property returns (+2.9%) were again positive.

Australian bonds (+3.6%) and overseas bonds (+3.5%) both out-performed cash (+1.1%) over the three months to 30 June.



The Reserve Bank of Australia (RBA) increased the cash rate target by 0.5% during the June quarter and 1.5% over the year. As at 30 June 2010, the cash rate target was 4.5%.

Since 30 June 2010 (looking forward)

REMEMBER!!
your superannuation investment is for the long-term, and the Fund's investment strategy takes a long-term view.

The major issues for investment markets going forward include:

• Inflation and interest rate outlook. Controlling inflation remains a key concern for the RBA. Year on year inflation for the March and June quarters was towards the upper end of the RBA’s target and the prospect of further interest rate increases in the short to medium term are a possibility.
• Australia’s reliance on economic growth in China. Economic growth in Australia is expected to continue to be reliant on the continued growth of its Asia Pacific neighbours and the demand of emerging Asia (particularly China) for base metals.
• High levels of government debt in Europe. Governments throughout Europe have been cutting spending and increasing taxes in an effort to reduce their debt levels. These measures are likely to dampen economic growth throughout Europe.
• Improving levels of confidence in Australia. After falling 13.1% throughout the June quarter, the Westpac-Melbourne Institute Consumer sentiment Index rose by 11.1% in the month of July. While the sharp increase suggests an upbeat view on the economic outlook it also demonstrates how quickly and dramatically sentiment can change.

In addressing these issues, the Trustee has ensured that the Fund’s investments are very well diversified and managed by professional investment managers that are expected to perform well in the medium to long term.

* All market returns shown above are before tax and investment costs.

Warning - General Advice Only

 This information is general advice and has not taken into account any individual’s particular objectives, financial situation or needs. Because of this, you should seek appropriate financial advice before acting on this information.

DEFINED BENEFIT INCREASE

CISF members have the best of both worlds when it comes to benefits. That is, they can have part accumulation which is linked to investment markets and all have a defined benefit which is not affected by the investment markets.

The defined benefit is calculated by multiplying 12% of the Benchmark Amount (13% for those years worked before 1988) for each year you have been a member of the Fund. The Benchmark Amount is increased on 30 June each year in line with the increases in Average Weekly Ordinary Time Earnings (AWOTE). The Benchmark Amount has once again had a very healthy increase of 5.81%.