Alpha POWER Shares (Aegis) Portfolio

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Alpha POWER Shares (Aegis) Portfolio - September 2007

Aegis Market Commentary

After digesting the recent reporting season and volatility in credit markets, the Australian sharemarket managed to reach record highs during September. One of the key drivers during September was the move by the US Federal Reserve to cut the federal funds rate by 50 basis points to 4.75%. This helped to restore some confidence to the US equity markets which in turn had a flow effect on the local sharemarket. The good reporting season and continued demand for commodities also helped to drive the local market higher in September.

For the month of September, the S&P/ASX 100 Accumulation Index rose 5.71%. In terms of monthly sector performance, Materials, Energy and HealthCare were the best performers. Information Technology and Telecoms were the worst performers.

Aegis comments on major out-performers:

Woodside Petroleum - WPL (+10.8%) benefited from the continued rise in oil prices and the announcement that it had signed a key terms agreement with Petrochina Ltd for the potential sale of 2-3Mtpa of LNG for 15 years from the Browse LNG development. Following its strong performance we decided to remove WPL from the portfolio at the end of September.

GPT Group – GPT (+6.7%) continued to rally following its solid 1H07 result, building on the strong gains made in August. The 1H07 result saw realised operating income increase 7.9% on 1H06, which was ahead of expectations. Overall, the result reflected a strong performance across all divisions. The interim distribution increased by 5.1% to 14.3cps and GPT confirmed that it was targeting distribution growth of 5% for FY07.

Westpac Banking Corporation – WBC (+4.8%) continued to rally ahead of what is expected to be another good reporting season for the major banks. WBC is due to release its FY07 result on 1 November 2007 and we are expecting the bank to report double-digit growth in earnings and dividends. Results continue to be driven by strong lending growth, sound asset quality and good cost control.

Aegis comments on major under-performers:

Centro Properties Group - CNP (-10.0%). With a significant exposure to US property markets, CNP was impacted by concerns about a slow down in the US economy and a flow on to US retail spending. At the end of September we removed CNP from the portfolio to reduce our exposure to the US retail property markets. We retain a reduced exposure to US retail property through a holding in Macquarie Countrywide Trust. (See below).

Macquarie Infrastructure Group – MIG (-5.5%). MIG continued to drift lower through September despite announcing toll rate increases on some of its key toll roads. In our view MIG is very good value at current levels.

Macquarie Countrywide Trust – MCW (-4.3%). Similar to CNP, MCW suffered from market concerns about the potential impact of a slowing US economy and flow on effect to retail sales. With a yield of 8%, we believe the stock offers good value at current levels.

Portfolio Changes At the end of September, we took the opportunity to increase the number of stocks in the portfolio to 15 in order to increase the portfolio diversification. We also removed a number of stocks from the portfolio.

Additions to the portfolio

Babcock & Brown Infrastructure Group (BBI)
Fairfax Media (FXJ)
Macquarie Bank (MBL)
National Australia Bank (NAB)
Orica (ORI)

Deletions from the portfolio

Centro Properties Group (CNP)
Tabcorp Holdings (TAH)
Woodside Petroleum (WPL)

IMPORTANT NOTICE:Aegis Investment Partners Pty Ltd (ABN 98 096 109 125, AFSL 226 957) (“Aegis”) is the stock selector for the Alpha Model Portfolio – Aegis. The information contained in this document is prepared by Aegis for use solely by professional investment advisers and is not intended to be provided to retail clients. In preparing this information, it is not possible to take into consideration the investment objectives, financial situation or particular needs of any individual recipient. Investors should obtain individual financial advice from their investment advisor to determine whether information contained in this document is appropriate to their investment objectives, financial situation or particular needs before acting on that information. Prior to deciding whether to acquire, hold, or sell the Alpha Model Portfolio - Aegis, you should obtain and consider the Alpha Customised Portfolio Service Product Disclosure Statement dated 19 December 2006 (to be read in conjunction with individual financial advice), available on request from Alpha Structured Investments (1300 769 694 or www.alpha-invest.com.au). While all information is provided by Aegis in good faith, Aegis makes no warranties as to its accuracy, reliability, completeness or whether it is free from error or omission. Subject to statutory limitations, Aegis, together with its directors, officers, employees and related body corporates, do not accept any responsibility or liability arising from decisions made relying upon information contained within this document. This document is only to be distributed to Australian residents. All intellectual property relating to this document vests with Aegis unless otherwise expressly agreed.