Super News

Investment Market Liquidity - 28 October 2008

Despite the volatility in financial markets, the Plan remains in a healthy financial position. While the emergence of negative returns raises concern and anxiety for members, the Trustee continues to closely monitor the Plan and its investments to ensure that the underlying investment strategies remain sound and appropriate, and that member benefits can continue to be met.

The Federal Government’s recent initiative to protect bank deposits was aimed at providing confidence to individual investors and to allow banks to more confidently lend monies to other businesses. Investors have moved quickly to redeem investments not covered by the Government “guarantee” which has resulted in some investment funds freezing investor access to their monies.

These events have had little impact on the Qantas Superannuation Plan and its investments, and the Plan continues to operate on a business-as-usual basis. Specifically,

The Plan continues to pay all benefits and other payments given the strong liquidity position of its investments. There has been no ‘freeze’ on any benefit payments from the Plan;
The benefits remain covered by the Plan’s assets. The Trustee has been closely monitoring this coverage and the Plan assets continue to exceed the total resignation (or retirement) benefits; and
The Plan continues to receive contributions and rollovers from members.

Distribution of the Investment Fluctuation Reserve (IFR) (20/10/2008)

The Trustee declares the Credited Interest Rates (CIRs) on a monthly basis. When determining CIRs the Trustee aims, as far as practical, to credit the actual investment return achieved by the Plan.

Because the CIRs are expected to be very close to the actual returns each month, any deviations are expected to be small.

Over the year to 30 June 2008, an IFR did emerge. The IFR primarily arose from deviations of actual asset allocations to the strategic asset allocations in the Member Investment Choice (MIC) options, with the exception of the Cash Options.

At the Trustee’s Board meeting held on 17 October 2008, the Trustee resolved that the IFR should be fairly distributed between accumulation members and the assets backing the defined benefit liabilities.

Accordingly, the CIR for October 2008 will be increased by the following amounts reflects this IFR distribution:

MIC Option	Cash	Conservative	Balanced	Growth	Aggressive
Members other than Division 9 members	0.0%	0.15%	0.30%	0.45%	0.55%
Division 9 members	0.0%	0.17%	0.36%	0.52%	0.65%

The highest distribution is made to the Aggressive Option, as it has the highest proportion of return seeking assets which were impacted most by the deviation from its strategic asset allocation.

The Interim CIR for October 2008 will also be adjusted, so that members who leave the Plan after 17 October 2008 but before the October CIR is known and applied will also share in this distribution.

Looking forward, the Trustee will continue to monitor the IFR on an annual basis, and may distribute any amounts that arise, whether positive or negative.

Investment Update - 16th October 2008

Investment markets have continued to experience significant volatility in recent weeks, with the growing level of uncertainty reflected in the significant declines in global equity markets, particularly late last week. As a consequence, Governments around the world have begun to intervene in a more aggressive and coordinated manner to help provide greater support and stability to financial markets.

Despite these initiatives, financial markets are likely to remain volatile in the short term and the Trustee acknowledges that these can be worrying times for members, particularly given the intense media attention that has accompanied the current uncertainty.

The Trustee continues to monitor the Plan’s investments very closely. It is confident that the underlying investment structures are appropriate to deliver on all investment objectives. Moreover, the Plan’s investment team are turning over all stones to ensure that all investment strategies are being implemented as expected and that no unexpected risks are arising.

We highlight the following key features of your investments with the Plan:

It is the long term performance of the Plan that has the most impact on accumulation benefits.
the Plan uses appropriately diversified investment strategies with significant exposure to high quality, liquid assets which helps to minimise the risks associated with any particular investment or investment manager;
Each MIC Option continues to meet its investment objectives, which are measured in terms of both risk and return;
the Plan has performed well in comparison with its peers. Notably, the Plan’s default Member Investment Choice (MIC) option, the Growth Option, ranked in the top quartile of superannuation funds over the year to August 2008 based on the SuperRatings performance survey. Over three and five years, the Growth Option ranked in the middle of the second quartile which is where the Trustee has positioned this option.

Recent Market Turmoil - 24th September 2008

The Plan exposure is small to Lehman Brothers and AIG

The recent bankruptcy of Lehman Brothers and the bailout by the US Federal government of AIG has caused much concern in investment markets and amongst the public generally.

It is important to remember that the investments of the Qantas Superannuation Plan (the Plan) are very well diversified across many asset types and many investment managers. This diversification is particularly important at times like these when markets (and certain investments) are volatile.

At present only around $2.5 million of the Plan’s $5.8 billion (or 0.04%) are directly exposed to Lehman Brothers investments. Thus the direct exposure to Lehman is very small. In addition, the exposure to AIG is also very small, around $3 million (0.05% of all assets). The announcement by the US Federal government of a US $85 million liquidity facility has acted to provide stability to the AIG business and the financial markets in general.

There will also be some indirect exposure through the Plan’s investment managers that operate investment pooled vehicles, although the overall exposure is expected to be small and appropriately diversified across the Plan’s managers.

The impact on Credited Interest Rates (CIR)

Because the exposure to Lehman Brothers is so small, there is expected to be little, if any, impact on the final CIRs for the Plan.

At present there is considerable volatility in the investment returns of Australian and International equity markets. For those Member Investment Choice (MIC) Options with a significant exposure to these markets (such as the Growth Option or the Aggressive Option), the CIRs will partly reflect these equity market return variations.

However, the CIRs will also reflect the other asset classes in which the Plan invests. By diversifying over a number of asset classes the Plan seeks to 'average' these fluctuations over many different investment types.

Finally, it should be remembered that superannuation is usually a long term investment. Although some variations are expected in the short term, the longer term investments are more important in determining the ultimate level of benefits. For example, despite the current volatility, the 5 year average return for the Growth option is meeting its investment objective of outperforming the CPI by 4% over rolling 5 year periods.

Negative Investment Returns for the year to 30 June 2008

At the end of the financial year, expectations of a very poor year for equity market investment returns have been confirmed. The index investment return for Australian equities was -12.1% and -20.8% for (unhedged) international equities for the year.

This year’s result follows a sustained period of strong investment performance in these markets. When combined with earlier returns, the annualised investment returns over the last 5 years were +16.8% pa and +4.55 pa for Australian and international equities respectively.

As a result of these negative returns, it is expected that the Growth, Balanced and Aggressive options will deliver a negative Credited Interest Rate over the last year. We will not know the actual return until 18 July, once all of the investment information is available.

Despite the last year, the Plan is still delivering investment returns in line with its long term expectations. In particular:

All investment options are meeting their investment return objectives, especially the Growth option which is the default option for the Plan. Risk objectives are also being met.
Despite the negative investment return for the year to June 2008 over the last three and five the return for the Growth option will still be close to double digit returns;
On the most recent data (May 2008), the Plan’s investment performance has outperformed that of most other superannuation funds; and
The Plan is still in a healthy financial position.

New website enhancement now available

Contribution and rollover transaction information is now available. To view transactions for the last two financial years, members will need to 'check in' to the secure member's area on the left hand side (top) of this page.

Enhancement to Member Investment Choice (MIC) - Monthly Switching

With effect from 30 May 2008, the Trustee has approved a change in policy to allow switching of MIC options on a monthly basis.

This change is a direct result of increased member requests for added flexibility in the frequency of MIC switching.

Previously, MIC switches were effective from the first day of the quarter following the receipt of a switch request. From 30 May 2008, all MIC switches will be effective from the first day of the month following receipt of the request.

All other aspects of the MIC arrangements will not change:

the MIC Option chosen will continue to apply to all relevant accounts;
the Credited Interest Rates will reflect your MIC Option chosen, and are not guaranteed;
there is no limit on the number of switches that can be made during a year;
there will be no fees or charges made to members for switching; and
the Growth Option will remain the default option.

If you wish to change your MIC Option you can either complete an MIC Option Notification Form or enter your new MIC Option online via the secure members area of the website.

Your decision regarding your MIC Option is important. The Trustee recommends that before you act on any information contained in this website or the PDS, or change your superannuation arrangements, you seek professional advice from a licensed financial advisor.

More details on these changes will be provided in the June newsletter, to be distributed shortly.

New Salary Sacrifice Option

Following a request by the Company the Trustee has resolved to amend the Trust Deed. This amendment will allow the Plan to accept contributions for defined benefits on a pre-tax or salary sacrifice basis rather than as after-tax contributions which is the only option at present. The defined benefit contributions covered by this amendment are the mandatory member contributions in Division 1, Division 2, Division 3 and Division 4.

The salary sacrifice option will be available to membership groups as notified by the Company. At present the Company has advised that this option will be available to employees covered by the Australian Services Union and the FAAA (Long Haul Flight Attendants).

More information on this option will be made available to members in the next few weeks and regularly updated on the website.

January Investment Market Shakeout: What impact?

In the month of January global stockmarkets recorded the worst investment performance since 1987. During the month the gross of tax investment return for Australian Equities was around -11% and for international equities (unhedged) was around -9%. Within the month the markets were very volatile.

Because the Plan has diversified its investments across a range of asset classes, the impact of the poor equity performance is less severe. For January, the Plan earned around -6% (an estimate based on current market indexes).

This poor investment performance follows a sustained period of strong investment performance. At the end of January, and despite this poor performance, the Plan remains in a healthy financial position. The Plan's Actuary has confirmed that at 31 January 2008 there are more assets than needed to pay the benefit to members, should they all voluntarily cease employment at that date.

This investment performance will not impact on members with defined benefits as these are not related to investment performance.

However, the investment performance will impact on the quarterly Credited Interest Rates which will next be declared at 31 March 2008. and which are applied to accumulation balances. These rates will also include the investment performance during February and March.

As always, it is the long term investment performance of the Plan over the period of a member's membership that is important in ultimately determining the amount of an accumulation benefit. For example, if the poor return for January is added to the three years performance to 31 December 2007, then the average annual return for the period remains at 10% p.a. (for the Growth Option).

New Website Features

A number of new website features are available now to members. These include:

Benefit Quotations. You can access your leaving service benefit quotation in real time, including the value of your leaving service benefit at today's date, the tax implications, and the preserved and unpreserved components;
Member Investment Choice Switches. You can now make MIC switches on-line; and

To access these features you need to 'check in' to the member area on the left hand side (top) of this page. More check in tips are available at the bottom of the page.

Check in tips - how to access the Member's Area

If you have been having problems trying to check in to the member's area of the website, here are some tips for you:

Open a new internet browser window if you have recently requested a new PIN
After three failed attempts, your access will be locked. You will then need to contact the Plan to organise the unlocking of your access.
If you do not know your PIN, you can only request a new PIN from the website. This request is computer generated and cannot be accessed by the Plan.
Your PIN can only be a 4-digit number.

Please note that a PIN is not required to access the majority of the website such as the Documents, Super Facts, Investments and Policies sections.