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Lateline Business -

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That's all from us for this

evening. Tonight's interview

with Lawrence Springborg can be

replayed on our web site. You

can also download individual

stories or play back the entire

program from the site, which

also contains our archives and

transcripts of our major

streers. Now to Lateline

Business with Ali

Moore. Tonight - the health

care industry told it's not

doing enough to prevent

terrorism and security

breaches. Australia's big

insurers likely to drop their

premiums after a record year,

and fund manager IOOF announces

its own jump in profits, but

predicts an end to the share

market's spectacular growth. A

market that rises in the sort

of single digit - the high

single digits to 12 or 13 or

14% would be certainly against

recent years a quieter year but

may even be more flat than

that.

To the markets. And local

shares closed at a 14 week high

driven up by the big miners though trading was thin in the

absence of a lead from Wall

Street of the both the All Ords

and the benchmark ASX 200 were

up with the futures market

still optimistic. In Japan the

Nikkei rose as investors sought

out Internet stocks. Once again

Softbank was much in favour but

the Hang Seng retreated as

investors took profits. The US

market is open shortly after

the Labour Day holiday. One

commodity that's been heading

down is oil. Dipping again

today on world markets to just

above the $69 US mark, a fall

of $1. At its peak in July,

just seven weeks ago, it was 77

a barrel and there was talk it

would go to $100. But tonight,

it looks like it's going in the

other direction. The question

is: for how long? I put that

question to nooul Hume from the

financial times in London. Oil

prices still falling in Europe

this morning? Yes, it's slightly lower this morning

obviously after the big falls

of last week. We think there

could be some more pressure on

the oil price this afternoon. Chevron the US oil company has

just announced a huge find in

the Gulf of Mexico. If it's as

big as some of the rumours

we're picking up the oil price

order could be heading down to

test levels of around $65 a

barrel, which some of the lists

have been talking about in

London this morning. How much

more can you tell bus this oil

find? The details are sketchy

at the moment. Chevron are sort

of saying that they're still

testing the production flows

from the well. We're not quite

sure. But it does seem that it

is a pretty sizeable find.

Despite not having a lead from

Wall Street yesterday, equity

markets in Europe actually did

pretty well. They were at close

to four-month highs, but down

this morning? Yeah. There is a

bit of nervousness ahead of

Wall Street open ing. People

really want to see how Wall

Street reacts to Friday's jobs figures. Although Wall Street was open on Friday, it was

pretty much a half day as a lot

of people went away for the

holiday weekend. I think the

European markets want to see

how Wall Street takes those

figures. And we shouldn't

forget that markets across

Europe, including the FTSE and

the others have had a very good

run over the last month and a

half. The FTSE is up significantly. People waiting

to see how Wall Street comes in. A lot of people this week

are coming back from their

holidays. We'll really get to

find out just how strong this

recent rally has been in the

next few days. Following on

from those jobs numbers, what's

the expectation when Wall

Street opens? I think it's

supposed to open pretty much

flat this afternoon. Big

figures coming out of the

States tomorrow, we have

productivity figures for the

second quarter. So I think

people will want to look at

those. Really just to assess

the outlook for interest rates.

I think with some of the hints

that have been coming out of

the Fed recently, people expect

US interest rates to stay on

hold now, not to rise again.

Thank you very much for your time. We'll keep an eye on that

oil discovery. Thank you.

Back home now - the

superannuation industry has

welcomed the Federal Government's confirmation it

will go ahead with the overhaul

of the superannuation system

announced in the May budget.

The centrepiece remains the

abolition of tax on

superannuation benefits for the

over 60s, but after considering

more than 4,000 submissions,

the government has further

sweetened the package, adding a

billion to the cost. This is

the biggest reform to

superannuation that Australia

has ever seen. It smashes

through the complexity. It

makes superannuation the best

investment a person can make in

their lifetime. Among the modifications announced today

are allowing the contribution

of up to $1 million to super

during the 12 month transition

period. Up a $1 million from

the sale of a small business

will also be able to be put

towards super. We'll look at

the impact of those super

changes later in the program,

with Ron Dewhurst, head of fund

management group IOOF which

reported a big rise in earnings

today. The company unveiled net

profit after tax of $23

million, up 54% on last year.

IOOF says its assets under

management grew by 30% during

the year but profit margins

continued to shrink. And the

company is warning the

spectacular growth of global

share markets is unlikely to

continue. IOOF is forecasting

double-digit profit growth for

itself in 2007, as it

concentrating less on

back-office functions and more

on customer service. Now to

media, and the regional

television network Prime has

reported a $30 million profit

for the last financial year, up

34%. Prime also announced that

it was extending its

affiliation with the Seven

Network for another 10 years,

and Prime says it's well

positioned to take advantage of

any opportunities that may

arise from the proposed changes

to media laws. The company

announced an increased final

dividend of 8 cents a share.

Well away from profits to

acquisitions and Wesfarmers has

moved to expand its insurance

arm with a 700 million cash

offer for Melbourne based

insurance broker OAMPS. It's

the first major acquisition

under CEO Richard Goyder, who

took the helm last year and who

told us last month he was on

the look-out for opportunities.

Wesfarmers offer of $4.50 a

share has won the support of

OAMPS' management which is

recommending shareholders

accept the deal. Mr Goyder says

he sees the insurance sector as an important part of the

future. We like the insurance

sector. We've been looking at

opportunities to grow it. OAMPS

is a very well-run business

which has had very good performance. Both companies

hope a takeover will be

finalised by the end of

October. OAMPS shares rose 19%

when the offer, worth more than

16 times earnings, was made

public. Still on insurance - and customers have been told

they can expect premiums to

remain the same while possibly

fall after a record year for

insurers. A survey by KPMG

found Australia's largest

insuresers achieved a combined

after-tax profit of more than

$3.5 billion in the past

financial year. Australia's

top insurance companies could

be about to past on the

benefits of record proosts to

consumers. So we'll see

premiums probably continue to

soften, to weaken, if you wish.

I think for personal lines,

we'll see increasing

competition as well with

premiums not having the same

sort of increases year on

year. The survey covers the

top 10 insurers in Australia.

Over the past two decadeses

this year was the most

profitable for insurers.

Reaching a combined profit of

more than $3 billion and for

the first time, it comes when

competition is increasing . We're seeing that greater

diversity because of

competition. There is more

competition this time around

than there was last year, or

indeed in the years before. And

that has caused quite different

results to different insurance

companies. Adding to the

profits, claims were low,

particularly in Australia, with Cyclone Larry in Queensland

being the only major event.

This compares to last year,

when global insurers were hit

by Hurricane Katrina in the

United States. Analysts say

increasing competition will

continue to benefit the

customer. They probably won't

have too much in the way of

increase s although there may

be some but it will vary from

product to product. CTP insurance particularly if

you're in Queensland, you can

probably look forward to

ongoing price reductions. The

survey predicts customers can

expect to see more competition

in the industry in the next

financial year. It also says

the time is right for possible

mergers and pack siss, so that insurers can continue to

deliver sort of growth that

investors expect. It's taken

five years, but the industry

now thinks it's rebuilt its reputation since the collapse

of insurer HIH. The reporting

season may be winding down, but

there was more news on the

economy today, as the Reserve

Bank held its monthly board

meeting. To look at the numbers

and how the market reacted I

spoke earlier to Huw McKye from

Westpac. Huw McKye, a plethora

of economic indicators out

today F we start with the

manufacturing numbers, a marked

pick-up? Yes, indeed. The

Westpac survey of industrial

trends for the September

quarter showed that the

manufacturing sector is on a

recovery path after a bit of a

choppy start to the year. If

there's one thing we know about

Australian manufacturing, it's that it's very strongly linked

into the housing cycle. We know

in the first half of 2006,

housing was doing quite well.

Actually adding to growth on

the activity side, which is

somewhat unexpected, give yent

events through 2005. So

manufacturering is reflecting

that trend in housing, and

also, some of the more detailed

indicators inside, they speak

of labour market strength, and

they also point towards cost

pressures for manufacturers,

and that's something that the

Reserve Bank will be taking

very strong note of. But

no-one peace looking for a rate

hike to be announced form? I

presume it's still waiting for November? No, no-one expects

one tomorrow. I think that the

market is quite pleased with

the way the Reserve Bank is

running policy so far in 2006.

Finally, just briefly, what

impact did all these economic

numbers have on the market today, particularly given that

we didn't have Wall Street as a

leader? Yes, as you say Wall

Street wasn't there to give the

market a heads-up on what to do

today and so we were captive to

local developments and I think

that the downed revisions to Q

2 GDP, out tomorrow, did have

something of a dampening impact

on the market. It wasn't a

great day for gains and we also

had the energy index trading lower with Woodside leading

that move with pan an

announcement of much stronger

costs on one of their projects. Oil prices have been having a

tough time, after a great rub

of course but after peaking in

the mid to high $70 per barrel

range, they're down in the high

60s now, so that's not helping

the energy index, and that's

prevented the over all bourse

today from having a stronger

gain. More detail on the market

now, and top stock for the

second day running was Repco

after its 13% rise yesterday it

went up another 6%. The market

believes a takeover bid is in

the air.

We return to fund manager

IOOF now, and after last year's

strong profit announced today,

CEO Ron Dewhurst is bullish

about the future, though less

upbeat about prospects for the

overall equity market. I spoke

to Ron Dewhurst from Melbourne

earlier. Ron Dewhurst, thank

you very much for talking to

Lateline Business. Thank you.

$29 billion under management,

profits up 54%, but that said t

hasn't been an easy year, has

it? No, as we said at the start

of the year, this was going to

be a transition year for us. We had a number of big projects

on, but a 30% growth in funds

under management and

administration is certainly at

the top end of any of our peer

group and a 54% growth in

earnings is also an outstanding

result forth group. How

sustainable is that

growth? We've had very good

performance the last couple of

years but let's be honest,

we've seen share markets rise

over the last three years in

total by let's call it around

100%, so obviously that's extraordinary growth, and

growth in share markets help

all players, so that is part of

the rise in earnings you get.

So we are reliant on markets to

perform, but that said, only

about 60% of our assets are

actually in the equity markets

so our growth is even better

because some of it is only in fixed income and other forms of

securities. On equity markets

you've indicated the tail wind

that they've provided is no

more. What are we talking, a

correction or a for trid

time? If you had asked me 12

months ago I felt the market

would struggle in 205/06. It clearly shows you shouldn't pay

any attention to me! But I

think that because the growth

has been so extreme we probably

are due for some form of slower

year. I'm not saying the

markets won't rise, but it may

be a slower year. What's your

definition of a slower year?

10% up for the All Ords, say,

instead of 20? I think a market

that rises in the sort of

single digit, the high single

digits to, you know, 1 or 13 or 14% would be certainly against

recent years, a quieter year,

but may even be more flat than

that A month ago, there were

rumours of Alaneme ledged

accounting irregularities, some

executives were stood down

pending an internal investigation. --

alleged. Are you over those issues or is there still

lingering bad blood? No, that's

all completed and closed, Ali

and I think it's important to

note that in these days,

particularly in a business like

we're in, good corporate

governance is critically

important. The board expects

it, the regulator expects it.

It is important to go through

these processes. That said,

it's an internal matter that we were dealing with and it's

closed and finished. There were

no accounting irregularities? There was no

financial loss, there were no

client moneys involved. If an event like that was material to

us, we would be required to

report it to the regulator, and

to the stock exchange. As you

will note, we did neither of

those things. The reason is

because it wasn't material.

You have talked about growth in

the first half of this

financial year and for the

whole year you're forecasting

double-digit growth. Does that

mean anything near the 50-odd

per cent of last year? That

would be lovely to see, but

what we are saying to the

market is we will give them

firmer guidance in our annual

meeting in November, which is

what many companies do today.

But I would certainly hope that

when I say double digit, we'll

do somewhat better than 10%

growth. We're quite optimistic,

actually. We've started the

year fairly well. But once as I

said earlier the performance of

marfth r markets has an impact

of on how companies like us

perform. You have 77 million

of free cash. You would prefer

to spend that than give it

back? If we can't find

something that we can usefully

use it on, we will return it to our investor base over

time. Wouldn't you have to say

you must be finding things or

else you would've already given

it back? If we found something,

we certainly would've announced

that, so at this point in time

we haven't found something

specific to spend it on, but

clearly, if we haven't returned

it, maybe we think we will. With that amount of cash

sitting on your balance sheet,

would you expect to make a

decision one way or the other

within six months? I would be

very surprised if we were

talking at this time next year

and we had that amount of money

sitting on our balance sheet.

Looking at it right now, is it

most likely the money will be

back in shareholders' pockets

rather than on an ak snis If I

was looking at it today, that probably would be the

conclusion you would draw. The

fed rel treasurer today

announced the details of the

budget super changes. He says

they'll encourage more people

to invest in super. Will they,

and have you done any modelling

on what it will mean for your in-flows? I must admit today

has been a pretty busy day for

us with our profit announcement

out there but I had a quick

look at the treasurer's

announcement. I think can you

only draw a positive conclusion

for it. Do you think it will

make a material difference to

your in-flows? Well, you'd have

to say, let's just take an example. Whilst there are not

many people with a million

dollars after tax to spare in a year, probably there are a fair

number of them. If you're

entitled to put that in in one

year as against $150,000, I

think given the benefits that

come with that, you will find

people taking advantage of that

opportunity. We're likely to

see a bit of a spike in next

year's in-flows? I would be

surprised if we didn't. Ron Dewhurst, thank you very much

for joining us. Thank you.

Whenever we hand over

personal information - to

governments, banks, or the

health care industry - we have

the assurance of data

protection. Comforting words,

promising our personal details

won't fall into the wrong

hands. But a new survey of the

big companies in the health

sector has come up with some worrying conclusions . Sue

Lannin reports. Like most multinational companies, the

world's health care firms are

facing more and more challenges

in the global marketplace. It's

one of the most regulated

industries in the world, and

accounting farm Deloitte says

senior management is becoming

more aware of the risks. There

is a great onus of ensuring the

security an privacy personal

and other information as well

as the intellectual property.

The study covered 48 major

companies in the fieldings of

pharmaceuticals, biotechnology,

medical products and health.

First, the good news. Nearly

half the companies reported no

breaches in their security or

privacy protection programs,

over the past year. But a

quarter said there had been

breaches, and 28% weren't sure.

2% of companies said security

breaches had cost them more

than $20 million. Deloitte says

they need to spend more money

to prevent the unauthorised use of their products be a

information. It seems to be

until someone has a significant

breach or a significant

incident that affects their

brand or affects their reputation, they don't tend to

give it the investment of the

resources it requires. The

authors also say companies in

the sector aren't doing enough

to protect against the threat

of terrorist attack. The

industry is also under threat

from copyright piracy,

especially in the Asia Pacific

region. I think there is a lot

of anecdotal evidence that counterfeiting is a key concern

in those countries. And

certainly, protecting the research information that you

have is a part of counter

acting that counterfeiting.

Another issue is the widespread

use of outsourcing in the

health sector, the majority of

organisations surveyed

contracted out their IT

security work, but about half

didn't check that the

outsourcers complied with

company policies. Well, as we

heard earlier, shares in car

parts retailer Repco and and

insurance company OAMPS

continued their upward spiral

today as both companies look

set to fall prey to takeovers.

It's the latest in a rash of

merger and acquisition activity

which has helped drive the

stock market to a four month

high. In the thick of the share

price action are hedge funds

looking to make a quick profit,

although they've had a bigger

than normal appetite for risk,

hedge funds are often

misunderstood as Andrew

Robertson reports. Mention a

takeover and hedge funds are on

the prowl looking for a quick

buck. A case in point - this

week's $700 million bid for

travel group S8, owner of

brands such as Harvey World

Travel. Its shares opened the

week 33% higher than Friday's

close, they're up 50% in the

last three weeks. John Murray

is head of fund manager

Perennial and competes against

hedge funds for investor

dollars. They might say here is

a stock you pay a dollar a

share for it, they think it's

going up to 1.05 in the next

few days. Make a quick 5%

turn. There has been plenty to

choose from in recent times.

Coles Myer has been helped up

30% in the last month, Suncorp

Metway has added 13%, Fosters

10%. But what is a hedge fund?

They're also known as absolute

return funds, which means they

try to make a profit whether

their investments are going up

in value or down in value. They

do take risks that other

managed funds are not allowed

to, but despite their

reputation as speculators,

those risks are calculated. Hedge funds can be

quite conservative. They take

out insurance against falls in

the share market or insurance

against falls in particular

companies. Hedge funds are a

rapidly growing sector of the

investment market, with nearly

$20 billion under management in

Australia, and internationally,

they're much, much bigger. In

the last decade, hedge funds have gained credibility, with

most of the heavyweights in the

funds management industry now

also offering hedge funds in a

bid to boost returns to

customers and profits for

themselves. One of those

managers is Colonial First

State, where Hans Kunnen is

head of investment research. He

believes the myth of the power

of hedge funds is often overrated. The market is a

large place and there's plin

tee of room for threes players.

But they are swift and they can

create volatility but they

can't overwhelm the market.

Uno unless hedge funds all bet

the same way, and the most

famous example of this was in

Britain in 1992, when the

legendary George Soros led an

assault on the pound, it forced

the Bank of England to devalue.

Soros is said to have made a

billion pounds in a day. But

hedge fund activity can help

others to also profit. If we're

looking at buying a stock say

at a dollar a share and

suddenly it gets hit for

short-term non-fundamental

reasons down to 90 cents that

that creates an opportunity

because we can buy more

shares. Like other traditional

funds there are hedge funds for

almost every type of investment and region. The difference is

the way they work. To

currency markets now.

Back to that oil discovery,

announced by Chevron, that we

referred to earlier when

talking to London. The oil

giant has announced it's successfully completed a

record-setting production test

on the Jack 2 well in the deep

waters of the Gulf of Mexico.

Chevron says that during the

test the Jack 2 well flowed at

more than 6,000 barrels of

crude a day. The Gulf of Mexico

supplies around a quarter of

America's oil. The well was

completed and tested in 7,000

feet of water and more than

20,000 feet under the sea

floor. Chevron says it plans to

drill an additional appraisal

well next year. Now for a brief

look at tomorrow's business

diary. All eyes will be on the

Reserve Bank at 9.30 to see

whether they've moved interest

rates. The ABS releases June quarter national accounts numbers. Macquarie Radio

Network reports its annual

results and ASIC chairman Jeff

Lucy will address the

association of superannuation

funds in Sydney. Before we go,

a look at the business sections of the maij newspapers. The

'Australian' looks at how the

rising costs from the skills

shortage from affected the

North West Shelf partners. The

AFR says Steve Vizard was

unable to explain a mysterious

$5.2 million loan when he appeared in court in Melbourne.

That's all for tonight. As I

leave you, the FTSE is down 17

, the Dow is down 8. If you

want to review any part of

tonight's program, you can

visit our web site. You can now

watch the entire program

on-line or download it as a vod

cast. We'd also love to get

your feedback. Our email

address is on your screen now.

I'm Ali Moore. Goodnight. Captions produced by Captioning

and Subtitling International

(Sounds gong) CHILDREN CHATTER NARRATOR: The first day of classes at a school with special significance for the peasants of the remote mountain valley of Bagrot, in Pakistan. They've joined forces so that their children can enjoy a better education. MAN: Stand easy! Attention! Stand easy!

Prayer position. (Boys sing in Pakistani language) (Children join in)

This education will focus on learning English, which the people of the Bagrot Valley hope will open doors to the world for their children. (Man speaks Pakistani language) A tribal elder sums up the hopes of the whole valley this way. "In my day," he says, "there was still no school here. "You are lucky, because thanks to the English school, "you won't have to work in the fields anymore. "You'll become doctors, teachers and engineers, "and you will develop our valley further." MAN: In all Pakistan, for high posts, this... ..in the examination, you have to do in English. This is a pity. Government likes to make... Huh? ..er, some wealthy peoples... ..uh...big, and poor peoples...go... they should go more down. (Chuckles) Huh? Therefore, we feel ourself that we...why we should not go...high? In the 1980s, an impressive engineering feat was completed in northern Pakistan. It was the 1,300km-long Karakoram Highway, leading from Islamabad through the wild Karakoram Mountains, over the nearly 5,000m-high Khunjerab Pass, to China. Originally built for purely military strategic purposes, the highway has since become a crucial artery for the Northern Areas in Pakistan. At the same time, centuries-old infrastructures have been destabilised by the road. Through the Indus Valley, where caravans once travelled along a simple track, now a paved highway wends its way past newly established villages and through regions where the age of machines used to be only hearsay. The Karakoram Highway, or 'KKH' for short, has suddenly enabled the rapid movement of a vast number of people and goods. It has greatly reduced travel times

and has radically changed the traditional lifestyles of village communities. And there's no turning back. The KKH is a one-way street towards globalisation.

The route from Islamabad to Gilgit, the capital of the Northern Areas, is almost 600km. The perilous trip by bus takes around 14 hours, and frequently, the road is impassable. (Speaks Pakistani language) TRANSLATION: Once there was a huge rockslide, and I had to take the passengers back. The road was blocked for two days. I often have problems with the tyres, the engine and the brakes. The large buses from the lower areas travel to Gilgit. At this point, most passengers transfer to group taxis and small buses, which take them to their villages further along the KKH and in the side valleys. (Speaks Pakistani language) TRANSLATION: In earlier days, we made the trip here from Pasu on foot and by horse. That took 8 to 12 days, then another 8 days, which meant we were travelling 16 days in all. Then the trip took us farther, to Skardu. That was another 20 days, and from there to Srinagar, in Kashmir, in 16 days. Today, we can make the trip from Pasu to Gilgit in one day instead of eight. In recent years, the number of travellers has increased enormously, and this has necessitated the construction of a new bus station outside the city. Enterprising merchants set up their wooden stalls around the large square. Some of the merchants cater to the appetites of the drivers and passengers. Others sell products only recently available here in the mountains. Gilgit is bursting at the seams. This once-small city is spreading rapidly. Many new arrivals come from the lowlands, but most are from the mountain valleys of the region. Every day, trucks deliver supplies from the lowlands to the growing population. At the end of their long trip, the drivers still have to wait before unloading. To prevent complete traffic chaos,

they're not allowed into the city until the evening. (Speaks Pakistani language) TRANSLATION: Normally it takes a week from Karachi to Gilgit. This time we needed longer, because we were held up for two days by a breakdown. And then there was an important holiday along the way. TRANSLATION: At first, we were uneasy about travelling along the dangerous sections of the KKH, but now we've gotten used to it. It's well constructed, and that's good for our business. (Blows whistle)

At 5pm, the truck convoy is allowed into the city. HORN BEEPS The range of goods being delivered is wide. Much of it is provisionally stored, to be picked up later by traders for distribution and sale elsewhere. One item of particular value is cement, tons of which are delivered from the lowlands. The face of Gilgit is changing more and more as concrete structures constantly shoot up.