Capital gains and losses on equity investments are inherently difficult to forecast over the short term due to the volatile nature of these investment markets. Global equity markets react daily to news, current affairs and economic statistics. As at end June 2003, the SPA had approximately $368.552 million in equity related investments. A small 5% variance to the market values on these investments can lead to an $18.428m variance. As such the SPA must take a long term view when budgeting for these investment earnings.

The $58.793 million estimate was a combination of an estimated fall in market values on the equity investments of $55.593 million and estimated fund manager and administration expenses relating to the investment portfolio of $3.200 million for the financial year.

As at end February 2003, changes in the net market values of the SPA's investments were down $67.496 million, with management and administration expenses of $1.835m - a total of $69.331 million. Net investment earnings stood at approximately ($38.236m).

For the 2002-2003 estimated outcome the SPA forecast a conservative improvement on these investments over the remaining year, improving from ($67.496) million to ($55.593) million due to an anticipated small improvement in global equity market prices. Total net investment earnings for the 2002-2003 financial year were forecast to improve to ($10.100) million.

Over the last four months of the financial year, equity markets rallied strongly, both locally and internationally. These rallies, in percentage terms, were much larger than anticipated for the estimated outcome. From beginning March 2003 to the end of the financial year the SPA recorded over $41.8 million in investment earnings. The estimated outcome had anticipated approximately $28.1 million. This variance is due to the increase in market values over and above what was anticipated for the estimated outcome.

These strong rallies in global equity markets lead directly to the actual outcome of ($41.231) million being a $14.362 million improvement over the estimated outcome of ($55.593) million. Additionally, fund manager and administration expenses relating to the investment portfolio resulted in a saving of $0.317 million largely reflecting lower management fees payable on reducing equity values. The total variance to the estimated outcome for these expenses being an improvement of $14.679 million.