General market

C O N S T E L L A T I O N A U S T R A L I A N E Q U I T I E S F U N D
M O N T H L Y I N V E S T M E N T R E P O R T
D E C E M B E R 2 0 0 4
General Market
Stocks continued to rise over December as markets wound down Fund Performance
to 31 December 2004
for the festive season. Further falls in the oil price due to higher crude and heating oil inventories and predictions of further warm weather for the US helped sentiment. The Asian tsunami disaster late in the month had minimal impact on stock prices. US markets (except for energy) rallied with the S&P500 (3.3%), Dow (4.0%) and NASDAQ (3.8%) all reaching three-year highs. % Return 10
Some materials stocks (Alcoa, US Steel) lagged due to price falls in some commodities and broker downgrades, driven by valuation and fears of declining demand from China. Apple (UK pricing investigation), Goldman Sachs (Q4 revenues lower than expected) and Pfizer (heart problems with Celebrex drug) also underperformed. However other health care stocks advanced e.g. Cigna and Humana raised their profit forecasts and Merck reaffirmed profit targets and reported progress on its HPV vaccine. Morgan Stanley and National Semiconductor (good results) plus Intel (raised Q4 revenue outlook) also rose strongly. ^ S&P/ASX 300 Accumulation Index European sharemarkets rose but failed to match the gains in the US (France 1.8%, Germany 3.2%, UK 2.4%). The US Dollar fell Unit Prices
as at 31 December 2004
to new lows against the Euro as the US trade deficit widened further, eroding the value of European exports to the US. Asian markets held up relatively well in the face of the Tsunami crisis. Australia remained in the grip of a fully-fledged bull market. The S&P/ASX300 Index broke through 4000 for the first time, with the accumulation index finishing December up another 3.1%. Fund Composition
as at 31 December 2004
Newscorp’s initial (25%) exit from the local index caused a wave Benchmark
of buying in other stocks, as institutions re-balanced their portfolios. Retail brokers increased market share as retail investors deserted property (construction activity and house prices slumped) in favour of the booming sharemarket. Worrying profit warnings from GUD and Wattyl (due to slowing consumer demand and higher input costs) did not impact on broader market sentiment, although other retail (Colorado, David Jones, Just Group and Millers) names were also sold off. Pacifica also warned of lower profits while Amcor fell after announcing senior management changes relating to potential ACCC breaches. M&A (both actual and rumoured) activity drove Lend Lease, Southcorp, Foodland and Metcash higher, while CSL (HPV cancer vaccine developments), HHG (asset sale), Fosters (Lensworth sale), Leighton (contract win) and PBL (JV) also Total Stocks
advanced more than the market. James Hardie recovered after reaching a long-awaited agreement on asbestos liabilities. Dividend Yield (%)
Constellation Performance
The Fund delivered a strong return for December but
underperformed the market benchmark. Overweight positions in QBE and IAG were offset by falls in Amcor and Just Group. As was the case throughout 2004, cash holdings (however minimal) were detrimental to comparative performance. Note: Fund performance is calculated daily and compounded over the above periods. For further information on Constellation’s risk controlled Value
Daily performance is calculated as the percentage change in the Fund's unit price plus the percentage return from any distribution. investment approach or HomeGlobal™ method, please call Doug
Little or Phil Hart on 0292312833 or visit our web site at
Units in the Constellation Australian Equities Fund will only be issued where a Product Disclosure Statement is not required. The Fund is closed to new investors. This information has been prepared without taking into account the client’s objectives, financial situation or needs. Any person receiving this information should conduct their own investigations and seek advice from their own professional advisers on the appropriateness of the advice. Constellation makes no representation or warranty in relation to, and accepts no responsibility or liability for, and cannot guarantee, the genuineness, currency, completeness or accuracy or otherwise of this information. Past performance is not indicative of future performance. Neither Constellation nor the Trustee of the scheme guarantee the performance of the scheme. Constellation Capital Management Limited holds AFS Licence No: 238525.
C O N S T E L L A T I O N C A P I T A L M A N A G E M E N T L I M I T E D A B N 9 5 0 9 0 1 2 8 0 5 5
L E V E L 1 9 , 6 0 C A S T L E R E A G H S T R E E T , S Y D N E Y , N S W 2 0 0 0
P H O N E : 0 2 - 9 2 3 1 2 8 3 3 • F A X 0 2 9 2 3 1 2 8 4 4

Source: http://constellation.com.au/files/CAEF%20Monthly%20Report%20-%20Dec2004.pdf