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©2006 Westpac Banking Corporation. VPM001 (10/06)

IS IT THE END OF OIL? How long do we have?

WHICH WAY SUPER? Budget changes and playing to win.

SIMPLICITY & TRANSPARENCY Benefits of unlisted property trusts.

WHEN SFIs PAY OFF Plus “a new breed” in investing.

Issue No.1 2006

“ “It is estimatedthat the OPEC nations couldcontinue to extract oil at theircurrent rate for another 80 years,even if they don't find any more.

“ “All sectors ofcommercial property still

have potential, but it can be amatter of where to look.

“ “We discoveredthat 50% of respondentswere more worried aboutpetrol prices than interestrate rises.

contents02End of Oil – what are the consequences if we continue to consume at this rate?

04Superannuation – optimise yourinvestments following the recent budget changes.

06Unlisted Property – benefits and risks plusWestpac’s latest offering.

09 Margin Lending – ways you can “turbocharge” your investments.

10 Economic update from Bill Evans.

11 Self Funding Instalments and ways tocomplement your SMSF.

12 Helping small businesses grow – tips for “start ups”.

08 Regular featuresAre you an investment sinner or saint? Our phobias and irrational investingbehaviours.

Books to inspire you on your investment journey.

Money clicks – great websites to help youplan your investment strategies.

Key Terms for this issue.

02

10

End of oil Chris Caton, Chief Economist for BT Financial Group, talks aboutthe “peak oil” theory and itspotential impacts on how we live.

Economic update Bill Evans talks about inflation,petrol prices and what’s in store for 2007.

THERE ARE FEARS OIL SUPPLIES WILL BE EXHAUSTED THIS CENTURYWE ARE BECOMING MORE EFFICIENT IN OUR USE OF OILHOWEVER OIL PRICES ARE LIKELY TO REMAIN HIGH

end of oil?

02

Dr Chris Caton

The prolonged spike in oil prices, the stronggrowth in demand for oil in recent years, and theenergy needs of the developing world have all ledto an increased focus on the concept of "peak oil"production.

The theory is that no matter how much oil is stillin the ground, we are getting close to the pointwhere we simply won't be able to get the oil outany faster. Adherents to this view point to morethan 50 oil-producing countries, including theUS, that are already producing less oil than theyused to, indicating that they have already passedtheir peaks.

If this is true, prices will have to rise much furtherjust to ration the available (limited) supply, andit's not too much of a step from there to predictthat certain activities, such as air travel, maysimply become impossibly uneconomic. Theworld will have to settle for a far simpler way oflife. Our grandchildren will be far worse off thanwe are.

Let's suppose for a moment that this somewhatdire view is accurate. Investment markets haven'tfactored this world into their thinking. Today'scorporate world clearly exists on the assumptionof continued cheap and available energy, and isvalued accordingly. So if this assumption isproved wrong, sharemarkets will be at risk.

World economies, too, will suffer. The extent towhich this happens will depend on how clever weare at easing the transition to new technologies,and how good we are at conservation. These, inturn, depend on how long we've got.

What is an investor to do? Well an obvious, if notexactly easy strategy, would be to identify andinvest in those technologies that will come to thefore. Uranium will clearly be used more as asource of energy and it is possible that hydrogenwill be also be used. You may also wish to sellyour airline stocks!

But we shouldn't be too hasty to assume theworst. Economics works. One of the reasons whythe pace of oil discovery has slowed in the past20 years, is because the price was so low that thereturn to the capital spending necessary to findand deliver more oil simply wasn't high enough.With the price where it is now, that should andwill change. We will find new ways to extract oilfrom existing fields, unconventional sources suchas tar sands and shale oil will becomeprogressively more economic, and still largely-untapped and fecund areas, such as Russia andAfrica, will become more important.

Meanwhile, the relatively high price of oil willwork on the demand side also. The world alreadyuses far less energy per unit of output than it did30 years ago. The capital stock (including cars)is far more energy-efficient, and as the developedworld grows, it shifts its output towards servicesand away from goods, which tends to drive downthe demand for energy. Even though much of theworld's growth now comes from developingnations, these economies are remarkablyinefficient in their use of energy, and there isconsiderable scope for demand growth to beslowed by increased efficiency.

The kernel of truth behind the "peak oil" theory isthat oil is likely to remain expensive for a longtime. We will pay more to cool our homes and todrive our cars, but we will still be able to do it.The high price will lead to continued searchingfor new technologies to replace “black gold”.

The peak oil theory is almost certainly an over-reaction, but the investment-market implicationsof this are minor, since the theory has not yetbeen embraced by markets. The likelihood thatenergy prices will remain relatively high is goodnews for oil-producing companies in Australia,and also for coal producers, for example. Thelong-term future for the resource sector looksgood, since future world economic growth willcontinue to come primarily from the developingeconomies, but this does not rule out thepossibility of a short-term correction.

Dr Chris Caton is the Chief Economist for BTFinancial Group. Previously he was Chairman ofthe Indicative Planning Council, which advised theGovernment on matters relating to the housingindustry, and has worked in the Treasury, and theDepartment of the Prime Minister and Cabinet.For many years, he ran a long-term forecastingoperation in the United States, with someemphasis on the energy sector.

For further reading about thefuture of oil visit:

www.clubofrome.orgwww.opec.org

www.ga.gov.au/oceans

“ “It is estimated thatthe OPEC nations could continueto extract oil at their current ratefor another 80 years, even if theydon't find any more.

03

When speaking about the proposedchanges to the superannuation systemrecently, our Federal Treasurer was quotedas saying "It makes superannuation thebest investment a person can make in theirlifetime."

That is a big statement, so we havecompared two strategies that you mightconsider if you want to 'turbo' charge yourwealth accumulation. Tom chooses toinvest $500,000 in equities through super,while Jane uses $500,000 of her ownmoney and borrows an equivalent amountto invest in a Protected Equity Loan.Which works best*?

Playing the super systemThe concessional tax treatment insuperannuation is a big advantage of thisstrategy, and the Federal Government'splans to simplify super have further addedto its appeal.

According to Aman Ramrakha, Head ofTechnical Services, Westpac Advice, themain appeal of super is the 15% tax on

earnings, or even less with otherdeductions taken into account. "Plus, afterage 60, you will be able to access yoursuper tax free after 1 July 2007, and whenyou convert your super into a pension inthe same fund, you eliminate any capitalgains tax," said Aman.

Sweeping changes are planned for thesuper system - most to take effect on 1July 2007. The tax free access and theabolition of Reasonable Benefit Limits(RBLs) are two of the biggest changes.

The proposals have changed the landscapesomewhat with a greater emphasis oncareful planning to take advantage of theincreased concessional nature of super.This applies particularly to those who donot have significant assets already in superand may be holding sizeable assets outsidesuper.

Aman notes that there is a potential riskfor young investors in following thisstrategy as the laws may change. "Thedrastic changes come at a cost to futureGovernment revenue. There is potential forthese to be “watered-down” - perhaps byfuture Governments." However, if you arenearing retirement, there are majoropportunities to maximise your assets.

Other people's moneyGearing has long been a popular way ofbuilding wealth fast. Protected equityloans (PELs), for example, allow you toborrow to buy shares without putting upany of your own funds except for interestpayments and expenses. If the shares dowell, you walk away with a healthy shareportfolio at the end of the term. But ifthings don't go as expected, the shares will

which way

super?

04

Aman Ramrakha

be regarded as full loan repayment -regardless of their lower value.

Aman says that the main disadvantage ofPELs is the higher interest rate thanstraight margin loans. "Instead of around8%, the interest in the loans will beheading into the double-digits -somewhere around 12% or more."

"However, these types of loans work wellfrom a tax perspective. When comparingthis strategy to super, many people see theinterest deductions as a way of equalisingthe lower tax rates in super."

"When you are borrowing to invest, themain question is how much you are willingto pay for protection. In the situation weare looking at here i.e. Jan’s situation, Iwould suggest that someone with a 5 yeartimeframe could look at alternative formsof gearing to boost their savings - such asa margin loan or using the equity in theirhome - which has lower costs thanprotected equity loans," suggested Aman.

In the end, good tax advice is essential toensure you have the maximum amount ofmoney available to work for you, and notbeing lost unnecessarily to the tax man.

So what's the outcome?So how do the numbers stack up? After 5 years*, Tom's investment in super wasworth $1,192,857, whereas Jane's non-super investments trailed slightly at$1,154,190.

"This case study highlights that super ismore attractive as a result of budgetchanges and, coupled with lower incometax rates, can give gearing a run for itsmoney as a wealth creation strategy," saidAman.

"Plus, with the super strategy, an extraadvantage will come through in retirement,where those extra savings can beconverted into a tax free income stream -the internal tax rate of the super fund iszero and no tax applies on the incomestream paid out," Aman explained.

Perhaps Peter Costello was right after all?

Aman Ramrakha is Head of TechnicalServices, Advice. With over 16 yearsexperience in financial services, Aman'squalifications include a Bachelor ofCommerce and Graduate Diploma of AppliedFinance and Investments from FINSIA.

*Refer to page 13 for assumptions

For more information on superannuation

contactyour Westpac Financial Planner


Premium Wealth Services on 1300 887 758

More flexibility and control forSelf Managed Super Funds(SMSFs). Planned legislativechanges that benefit SMSFsinclude:

Estate planning - superannuationcan be left in accumulationphase indefinitely, (that is, youdon't have to convert it to aretirement income stream),providing greater flexibility withdistribution.

Unlimited growth - the abolitionof Reasonable Benefit Limitsraises issues such as the abilityto insure for significant amountswithout worrying about thepenalty tax if the RBL isexceeded.

In-specie transfers - in light ofthe new contribution caps andtax free benefits, the ability forinvestors to make contributionsor pay benefits via in-specietransfers (note tax implications)highlights this flexible feature ofSMSFs. Plus the Government hasindicated that in-specie employercontributions will not attract FBT.

Simplified administration ofSMSF, such as one annual return.

05

06

simplicitytransparency&

When you think of the current propertymarket, do you think oversupply,downturn, buyer's market? That's probablybecause you're thinking of residentialproperty. Turn your focus to commercialproperty and you will probably see acompletely different picture.

The fundamentals in most sectors of themarket are solid and if you like buyinginto a solid market, then considerWestpac's new Diversified Property Fund(WDPF).

Keith Grayson, Head of Property Funds atWestpac, says that while there has beenmuch talk of pockets of oversupply inresidential investment property, thecommercial property markets are in a verydifferent position: there has been ashortage of securely leased property in allcommercial sectors and across the country.

"The driver is increasing levels ofinvestment funds, from individuals to largefunds, taking a positive view about theperformance prospects for commercialproperty against the backdrop of a benignto positive economic outlook," he said.

And this is one of the advantages of thenew WDPF. The fund manager worksclosely with Westpac's Specialised CapitalGroup which gives it an increased abilityto access new investments, often off-market ( i.e. no-one else is bidding for it)using Westpac's experienced propertyteam and financing capabilities.

Keith Grayson

and other benefits of unlisted property trusts

Commercial sector fundamentals strongAccording to Keith, most sectors of thecommercial property market still havepotential, but the key is to identify thoseopportunities that offer sustainablereturns, rather than just short term upside.

"Office space has been the lagging sectorof the commercial property markets for thelast few years but is set to perform stronglyin the next 2-3 years. The key to how longthis lasts will be the strength ofdevelopers' response to a buoyant market.Office market cycles typically end with anoversupply of new stock but it is still earlydays in this commercial cycle and in mostcities oversupply is not yet a concern,"said Keith.

"The retail and industrial sectors areshowing the first signs of easing up after aheady 3 years of performance. Thefundamentals remain positive but investorsneed to be more discriminating to pickproperties that will maintain income andcapital growth."

The benefits of unlisted propertyListed property trusts (LPTs) have provenvery popular over the last few years as anentry into the commercial property market,however, Keith provided several benefitsof an unlisted fund over an LPT:

- Simplicity and transparency - unlistedfunds are typically less complex than LPTsin both structure and the range ofactivities they undertake to deliverinvestment performance.

- Less volatile performance - the pricing ofunlisted fund units is closely correlated tothe value of the properties in the portfolio.

The pricing of listed trust units is typicallymore volatile and reflects a wider range ofmarket influences than just underlyingasset value.

- Strong after tax income yields - unlistedfunds usually offer higher levels of taxdeferral on distributions, often 100% taxdeferred as is the case with the WDPF.Very few listed trusts offer this same taxefficient distribution profile.

One of the downsides associated withunlisted property is the relative illiquidity.Keith says that liquidity is really an issueonly if:

a) you are an active trader, in which caseyou probably wouldn't be looking at thistype of investment anyway,

b) the market drops - most investors whohave invested based on the fundamentalsof property take a long term view andchoose not to sell out at a loss, and

c) personal circumstances change - thenew generation of unlisted trusts, such asWDPF, now accommodate changes inpersonal circumstances by providinglimited redemption arrangements.

"It is insightful that the majority ofunlisted property trusts that have reachedthe end of their initial investment term -typically 5 to 7 years - have receivedstrong investor support to roll over for afurther term," said Keith. "Most investorsunderstand and accept the consequencesof committing to a medium to long terminvestment position if they have comfortthat the investment is secure."

Keith Grayson has 30 years of experiencein Property and Finance in Australia andthe UK. In his current role as Head ofProperty Funds, Keith is responsible for themanagement and growth of the portfolio oflisted and unlisted property trusts.

07

To find out more about the WDPF contactyour Westpac Financial Planner



“ “All sectors ofcommercial property still

have potential, but it can be amatter of where to look.

THE WESTPAC DIVERSIFIEDPROPERTY FUNDThe Westpac Diversified Property Fundis a new $275 million open ended fundoffering the opportunity to maximisereturns from a diversified commercialproperty portfolio. It offers thefollowing benefits:

Secure returns A portfolio of quality properties withlong leases to good covenant tenants.

Competitive yield A forecast 8.1% yield, 100% taxdeferred for the year to 30 June 2007reflecting the quality of the portfolio.

Growth potential The open ended structure and theDividend Reinvestment Plan enhancethe Fund's competitiveness whenacquiring properties and improvinginvestor returns.

Clarity and discipline A clearly defined set of investmentcriteria and diversification targetsunderlies more disciplined investmentand operational processes than manycompetitive products.

wealthbuilding ideas

three books to inspire youon your financial journey:

Richest Man in Babylon(published by New American Library, 2004)In 1926, George S Clason issued the firstof a famous series of pamphlets on thriftand financial success, using parables setin ancient Babylon to make each of hispoints. These were distributed in largequantities by banks and insurancecompanies and became familiar tomillions.

The Barefoot Investor(published by Pluto Press Australia, 2004)A great one to give your kids if they areleaving home. Scott Pape outlines howfinancial freedom is open to anyone,especially the young, who have time ontheir side. Especially relevant to those intheir twenties juggling a HECs debt, thedesire to travel, and a fledgling portfolio.

Winning investmenthabits - Warren Buffettand George Soros (published by Inverse Books, 2005) Mark Tier discovers how both these men,who started with nothing, used radicallydifferent investment styles, yet similarmental strategies, to become the world'srichest investors.

If you invest in a managed fund, don'tforget your halo because compared toshare traders, you're a saint. And whileyou're at it, discard your beliefs thatwomen are more conservative investorsthan men.

Recent research conducted by BTFinancial Group and the University ofWestern Australia (UWA) drew on dataover three decades from 850,000 investors.It revealed that if you invest in a managedfund, you are more likely to act morerationally than your direct equitycounterparts when choosing to sellinvestments. For example, unless you areconservative, wealthy, older and male, youprobably don't follow the trend wherepeople hold on to their losing investmentsand sell their winners.

The stereotype of male investors beingover confident and taking more risks thanwomen was also debunked. The researchfound that overall, female investors have agreater appetite for risk than men, and this'risk loving behaviour' becomes moreapparent with age.

Other findings included confirmation thatmen trade more frequently than women,wealthier investors have a greaterproportion of their portfolio in riskierassets, and supporting the 'life cycletheory of investing', older investors aremore likely to move from risky to safeassets as they age.

Are you aninvestment sinner or saint?

08

money clickswww.fido.asic.gov.auFinancial tips and safety checks, includingnews about managed funds and direct shares.www.ifsa.com.auThe investor fact sheet section coverseverything from finance tips for teenagers, tospecialist life insurance issues.www.understandingmoney.gov.auAn excellent interactive budget planner isincluded in a wide range of financialinformation and tools.

BT wins more awardsLess than a month after taking out theAustralian Financial Review SmartInvestor Blue Ribbon Fund Manager ofthe Year award, BT Financial Group hasscooped a number of awards in thisyear's Standard & Poor's (S&P) FundAwards. BT was noted for a strongperformance in Australian equities, aswell as good performance in Australianfixed income.

KEY TERMS

In-specie means you can transfer assets intoyour SMSF without having to sell first andrepurchase the asset.

Self Funding Instalments Westpac Self-Funding Instalments (“SFIs”) are analternative way of gearing into the stockmarket. They allow investors to buy Australianshares and units (collectively called‘Securities’) of many leading Australian listedentities in two simple payments or‘instalments’: First Instalment – Payable by all applicants toWestpac for an interest in the UnderlyingSecurity, including entitlements to anydividends, capital gains (or losses) andpotential franking credits. Second Instalment – also known as theCompletion Payment or Loan amount. It is anoptional payment if the investor would like totake ownership of the Underlying Security.

For more information on Margin Lending




During the year ended 30 June 2006, the Australiansharemarket, as measured by theAll Ordinaries Index, increased byaround 15 per cent. About one-third of all companies in theindex did better than this, but onthe flipside, the shares of abouthalf of all companies in themarket actually went down.

While many investors fear a general marketretreat, a greater risk for them flows from over-exposure to one or two shares that suffer amajor reversal. The antidote is to practice thegolden rule of diversification. But how do youdo this if you're a long-term investor who isreluctant to take profits and reinvest this moneyin other shares? Working against the idea ofselling successful share investments is theprospect of paying capital gains tax on anyprofits. Also discouraging selling is theexpectation of further price gains for sharesthat have developed some momentum.

If you find yourself in this situation, one optionis to borrow against your existing shareportfolio through a margin lending strategy tobuy different shares and diversify your portfolio.The suitability of margin lending is dependenton the customer's risk profile, investmentobjectives, needs and financial circumstances.While there is a popular perception that gearingyour portfolio by borrowing money is a veryrisky strategy, a properly managed marginlending strategy can be a lot less risky thanmany think, especially if employed as part of aportfolio diversification exercise.

The risk with margin lending is that the value ofthe portfolio you put up as security for the loanmight fall. A significant fall could result in youbeing asked to put up more security either inthe form of other investments or cash - this isknown as a margin call. One way of dealingwith the margin call risk is to ensure that youborrow less than the value of your portfolioinvestments will allow. If you have a loan limitof 70 per cent of your portfolio value, forinstance, you might limit your loan to 50 percent of the portfolio value. This is still areasonable level of gearing. If you have aportfolio worth $50,000, it will allow you toborrow $50,000 to make new shareinvestments.

If you have an average of, say, 50 per centgearing for a portfolio where you might have a70 per cent loan limit, it would mean that yourinvestments would need to fall 38 per centbefore you received a margin call. If you werehappy with all the investments in your existingportfolio, you could use margin loan funds to"re-balance" your portfolio, buying shares thathave underperformed but that you expect might

perform better still. If these shares did performbetter, your potential profits would be greaterbecause you boosted your investments at atime when the price was lower.

Effie Fildissis has worked in portfoliomanagement, retail banking and investment for10 years. She is now Senior Product Manager,Margin Lending, at BT Financial Group.

- Margin Lending is a potentialdiversification strategy for yourexisting share portfolio.

- You can use your existing cash,shares or managed funds assecurity and we lend you moremoney to invest.

- Address the risk by managingthe amount you borrow againstyour existing security.

“ “A properly managedmargin lending strategy can be alot less risky than many think,especially if employed as part ofa portfolio diversificationexercise.

PortfolioPower

09

Effie Fildissis

In September we discovered that 50% ofrespondents were more worried about petrolprices than interest rate rises (only 28%nominated interest rates as their main concern).

A calmer future?September saw petrol prices fall by 7% andwhen combined with less concern aboutinterest rates, the Consumer Sentiment Indexrecovered by 12.5%. That is pointing tostronger demand by consumers and ironicallypotential upward pressure on interest rates.

The survey did sound a warning to prospects inthe housing market. Over the last year we haveseen a solid recovery in house prices (up6.7%) and in the June quarter an upswing inthe residential building cycle and renovationspending. With building approvals up by 16%over the last 3 months that upswing is set tocontinue through to the end of the year.However sentiment relating to the housingsector has been falling and we are pencilling ina fall in residential building activity of around5% in 2007, and flat house prices.

Bill Evans is the General Manager Economicsfor Westpac, responsible for Westpac'seconomic research and advice. He haspreviously worked for the Reserve Bank ofAustralia and Schroders Australia Limited.

Inflation close to targetThe Reserve Bank of Australia (RBA) is clearlyworried that it has very little flexibility givencurrent growth and inflation. As is evident inthe graph below, the forecast is currently forcore inflation to be running at 3% for the next 2years - only 0.1% above the current reading.As supply in the economy appears to bereaching capacity, as evidenced by 30-yearlows in the unemployment rate, the growth ofdemand may lead the RBA to raise its inflationforecast, which would trigger a policyresponse. A 0.8% or more rise in core inflationin the September quarter would make a ratehike very likely.

Petrol prices more a worry than interest ratesThe impact of rate rises on consumer sentiment,which translates into economic demand, hasbeen interesting. The Westpac-MI Index ofConsumer Sentiment showed a fall of 16.2% (anear record fall) following the August rate rise,however, those who already had a mortgagewere less concerned than those without.

economicupdate

Interest rates on the edgeProspects for interest rates in Australia willhinge on inflation, the strength of the economy,and the outlook for global growth.

THE WESTPAC CONSUMERSENTIMENT INDEX

This monthly national random survey of 1400 individuals asks a series ofquestions relating to both the currentstate of their finances, their spendingintentions and their outlook for theeconomy.

It has proven to be a sound indicator of economic trends.

10

“ “We discoveredthat 50% of respondentswere more worried aboutpetrol prices than interestrate rises.

Bill Evans

% yr 9

8

7

6

5

4

3

2

1

0

-1Jun 90 Jun 94 Jun 98 Jun 02 Jun 06

Sources: ABS, RBA, Westpac* average of s.a. trimmed mean & weighted median CPI ex GST effect in 2000/01

Headline CPI Avg RBA core CPI*

CPI INFLATION: HEADLINE AND RBA CORE HIGHER

wheninstalmentspay off

Moghseen Jadwat

“ “SFIs allowinvestors to increase theirexposure to the equitymarket and create wealthquicker.

Key points:Self Managed Super Funds (SMSFs) can useSelf Funding Instalments (SFIs) because theydo not have to be repaidSFIs entitle the holder of underlying shares topotential dividends and franking credits.An SFI with a 10-year term stands a goodchance of being paid off completely

Two key factors often cited for successfulwealth creation are:

1. investing for the long term 2. using borrowed funds to invest

Fortunately, most trustees of SMSFs take along term approach when investing forretirement, and are aware that regulatedsuperannuation funds are generally prohibitedfrom borrowing except under certaincircumstances.

Although SFIs offer the investor the benefits ofgearing, they do not necessarily represent aborrowing as defined in SuperannuationCircular ii.D.4 Borrowing by SuperannuationEntities. This is because the SFI loan does nothave to be repaid.SFIs allow investors to increase their exposureto the equity market and create wealth quicker.Furthermore, there is no requirement for theinvestor to make periodic payments or beinconvenienced with margin calls duringvolatile periods. SFIs require two part-payments over time andin some cases only one payment. The firstpayment is for between 40 and 50% of thevalue of the share, with the balance borrowedthrough Westpac. For example, $50,000invested into a portfolio of SFIs will haveattached a loan amount (also known asCompletion Payment) of approximately$50,000, giving a total exposure of $100,000to the shares selected in the portfolio. In addition to the enhanced exposure, SFIs alsoentitle investors to any potential dividends andfranking credits. In the above example, thismeans that the investor is accessing potentialdividends and franking credits payable onshares that cost $100,000, while having onlymade a contribution of $50,000. Depending onthe composition of the portfolio, the investmentcould be positively geared (i.e. the incomefrom the $100,000 portfolio more than offsetsthe $50,000 interest on the loan).No further payments are required of investorsthroughout the investment term which can beup to 10 years. Westpac will receive thedividend trust distributions and automaticallyreduce your loan (known as the CompletionPayment) by any dividends or trustdistributions earned during the investmentterm. Interest will be charged by Westpac on30 June each year by increasing theCompletion Payment. So for the life of theloan, your cashflows are managed for youthrough this mechanism.

A NEW BREED The initial series of Westpac Self-Funding Instalments were issued with afive-year term however depending onthe shares and the dividends, only 30 to40% of the loan could be repaid overthis term.

Now the new 10-year Self-FundingInstalments reduce the need for this"rolling" exercise and increase theprobability that it will either be asmaller completion payment amountthat is owed when the warrant matures,or no completion payment amount atall. If you have one of these shorterperiod Westpac Self-FundingInstalments, you could consider"rolling" the investments in that Self-Funding Instalment to a new series ofthe same type of warrant over the sameshares.

Moghseen Jadwat is a Senior Manager Sales,Structured Equity Investments, WestpacInstitutional Bank.

To find out more about SFIs




11

recognise not only the direction you needto head in but also your key successfactors," said John.

Tony Connolly, a senior partner at PKF(chartered accountants) who has sent over30 of his clients on Beyond Survival, saysit should be compulsory for all smallbusiness people. "The course is justfantastic. All the jargon is taken out andpeople are given the tools to be successfulentrepreneurs. I've even sent staff on thecourse because it gives them a practicalside to their technical studies."

"The course underscores what I have beentelling my clients for ages: don't let youraccountant do your budgets and cash flowsfor you. You need to know what thosefigures are for yourself," said Tony.

In fact, John says that cash flow problemsassociated with sales growth is one aspectmost business people are least preparedfor. "It flies in the face of logic for many

How Westpac helpssmall businesses grow

Beyond Survival courses are open to anyone in a smallbusiness - you don't have to be aWestpac customer to join in.

For more information about Beyond Survival

visitthe business banking page atwestpac.com.au or

call 1800 012 501

Most people start their own businessbecause they find they have a specialtalent that people are willing to pay for. Butthat talent alone isn't always enough forsuccess - a business owner must also havea good understanding of the financials ofthe business to make it viable.

John Sgambelluri, from Westpac'sBusiness Banking team, runs a course forbusiness owners called 'Beyond Survival'."The main thing we wanted to achievewhen we first thought of the course 7 yearsago," said John. "Westpac has 180 years ofbusiness 'nous' - a lot of experience inpicking the winners. It makes sense thatwe share that knowledge with ourcustomers."

The course is ideal for both establishedbusiness owners and those thinking ofstarting a business. "I can't overstate thevalue of this course for people thinking ofbuying a business," said John. "Having abusiness plan is great, but you need toknow how to back-up that plan in dollarsand cents."

In fact, recognising that all small businesspeople are short on time, John nominatesplanning as the one task that should takepriority over others. "Planning, both shortterm and long term is important. By goingthrough this exercise you will soon

business owners that even whenprofitability is maintained whenexperiencing rapid sales growth, it is likelythey will require more cash to supportthese sales," he said.

Beyond Survival is facilitated by peoplewho have run their own businesses andhas a strong emphasis on practicality."Participants use information from theirown businesses - helping to reinforce keyfinancial concepts and management tools,and the interactive sessions allow fornetworking and sharing of experiences,"said John.

John Sgambelluri is a Manager for WestpacAdvisory and Training in Western Australia.He has more than 20 years experience incommercial and business finance.

“ “Having abusiness plan is great, but you need to know howto back-up that plan indollars and cents.

ACCORDING TO JOHN, THE THREEASPECTS THAT ESTABLISHED,SUCCESSFUL PEOPLE HAVE INCOMMON ARE: THEY QUICKLYRECOGNISE KEY SUCCESS FACTORSAND MEASURE, MONITOR ANDMANAGE THEM REGULARLY. THEY ARESPONGES FOR INFORMATION, NEVERBELIEVING FOR ONE MOMENT THEY'RETHE CUSTODIANS OF ALLINFORMATION IN THEIR CHOSENINDUSTRY THEY ALWAYS SEEKPROFESSIONAL HELP AND CAREFULLYCHOOSE THEIR ACCOUNTANT,LAWYER, BANKER AND FINANCIALPLANNER

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John Sgambelluri

View is published by Westpac Banking Corporation ABN 33 007 457 141 AFSL. 233714(Westpac). Westpac Financial Planners are representatives of Westpac. WestpacInstitutional Bank is a division of Westpac.The information contained in "View" (the Information) is based on information available at19 September, 2006 and is not intended to provide investment or taxation advice. WhileWestpac (or another member of the Westpac Group) has made every effort to ensure theInformation is free from error, no company in the Westpac Group warrants the accuracy,adequacy or completeness of the Information.The proposed changes to tax and super mentioned in the Information are not yet law andare subject to the passage of legislation. The final legislation may not necessarily matchthe budget proposals.The Information has been prepared without taking into account your objectives, financialsituation or needs. Because of this, you should, before acting on the Information, considerits appropriateness, having regard to your objectives, financial situation or needs. Thetaxation position in the Information described is a general statement and should only beused as a guide. It does not constitute tax advice and is based on current tax laws and theirinterpretation. Westpac Financial Planners are not qualified to give tax advice. Theexamples in the Information are hypothetical examples only and are not illustrative of howtax or superannuation laws will necessarily apply to you. Your individual situation may differand you should seek independent professional tax and superannuation advice on anytaxation and/or superannuation matters. Past performance is not a reliable indicator offuture performance.The Information may contain material provided directly by third parties. While such materialis published with necessary permission, no company in the Westpac Group acceptsresponsibility for the accuracy or completeness of any such material. Except where contraryto law, Westpac intends by this notice to exclude liability for the information. Theinformation is subject to change without notice. No part of the Information may bereproduced without the prior approval of Westpac.

UNLESS OTHERWISE STATED: Westpac Banking Corporation or member companies of the Westpac Group do notguarantee the repayment of capital or investment performance. The investments are notinvestments, deposits or other liabilities of Westpac Banking Corporation or membercompanies of the Westpac Group; and investments are subject to investment and otherrisks, including possible delays in payment of withdrawal amounts in some circumstancesand loss of investment value, including principal invested.Westpac's Financial Services Guide can be obtained by calling 1800 990 107, visitingwww.westpac.com.au or by visiting any Westpac branch.

IMPORTANT INFORMATIONWhen instalments pay off, page 11Westpac Banking Corporation (ABN 33 007 457 141, AFSL 233714) (Westpac) is theissuer of the Westpac Self-Funding Instalments (SFI). A Product Disclosure Statement(PDS) is available for the Westpac SFI. A copy of the Westpac SFI PDS and a copy ofWestpac's Financial Services Guide can be obtained by calling 1800 990 107 or visitingwww.westpac.com.au/structuredinvestments. You should obtain and consider the PDSbefore deciding whether to acquire, continue to hold or dispose of the Westpac SFI.Portfolio Power, page 9Gearing can magnify losses as well as returns.

Which way super? page 4*Assumptions:Tom and Jane both earn $200,000 pa.We assume that both Tom & Jane have the capacity to apply the gearing strategy. Tom's$500,000 into super is via a post-tax contribution.Five year PEL of $500,000, interest rate of 12.5%pa. Interest 85% deductible. Growth based on monthly change of S&P 200 from January 2001 to December 2005.Income 4% with 70% franking. The final amount is net of capital gains tax. Assumes Tom isaged 60 or more and accesses the benefit as a lump sum under the proposed rules. To ensure an effective comparison we assume that Tom invests an annual amount intosuper equivalent to the net cost to Jane of the PEL strategy. This gives Tom and Jane thesame overall net income.Westpac Banking Corporation (ABN 33 007 457 141, AFSL 233714) (Westpac) is theissuer of the Westpac Protected Equity Loan Plus (PEL Plus). A Product DisclosureStatement (PDS) is available for the Westpac PEL Plus. A copy of the Westpac PEL PlusPDS and a copy of Westpac's Financial Services Guide can be obtained by calling 1800990 107 or visiting www.westpac.com.au/structuredinvestments. You should obtain andconsider the PDS before deciding whether to acquire, continue to hold or dispose of theWestpac PEL Plus. Simplicity & Transparency, page 6Westpac Funds Management Limited 28 085 352 405 is the responsible entity of theWestpac Diversified Property Fund (WDPF) and is the issuer of units in WDPF. A ProductDisclosure Statement (PDS) or other disclosure document is available for WDPF and can beobtained by calling 1800 990 107 or visiting www.westpac.com.au/structuredinvestments.You should obtain and consider the PDS or other disclosure document before decidingwhether to acquire, continue to hold or dispose of units in WDPF.An investment in the WDPF is not an investment in, deposit with or any other liability ofWestpac Banking Corporation ABN 33 007 457 141 (the Bank) or any other company in theWestpac Group. It is subject to investment risk, including possible delays in repayment ofwithdrawal proceeds and loss of income and principal invested. Neither the Bank nor anyother company in the Westpac Group stands behind or otherwise guarantees the capitalvalue or investment performance of the WDPF

© 2006 Westpac Banking Corporation ABN 33 007 457 141.

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