Welcome to this month's Bluewater section of Round Up.  We are able to report on Bluewater’s performance in March 2006.

The latest official Net Asset Value ("NAV") for Bluewater A Shares have been reported by the Administrator for 31 March 2006 at $1.0391  (February $1.027).

We are awaiting estimated returns for April. These results are normally available approximately 2 weeks after month end with final results 4 weeks after month end.


Financial Market Review for February

Global equities performed strongly in March, with markets in Europe and Asia outperforming those in the US. The MSCI World index gained 2.49% in local currency, and 2.24% in US dollars. In the US, the S&P 500 gained 1.11%, while the Russell 2000 small cap stock index gained 4.72%. MSCI Europe gained 3.39% in local currency. The UK market returned 3.86% in local currency. The Japanese equity market recovered from its recent losses, as MSCI Japan gained 4.48% in Yen.

Gottex Market Neutral Fund - Allocation to Various Hedge Fund Styles

Relative Value Funds (Allocation 43%)
Event Driven (Allocation 34%)
Hedged Equities (Allocation 22%)
Tading 1%

Gottex Market Neutral Fund - Performance of Various Hedge Funds Styles

All of Gottex’s Funds posted solid gains in March, led by strong equity market returns which in turn fuelled positive returns in many equity-related hedge fund strategies. Performance was driven by strong gains in convertible arbitrage, where, despite low levels of equity volatility, bonds continue to richen from the lows that were seen last summer. They have increased their allocation to convertible arbitrage managers over the past few months and expect continued strong performance going forward.

Quantitative market neutral managers continue to deliver solid performance. Event-driven equities and merger arbitrage once again delivered good results. Gottex continue to favour these strategies in their portfolios and they have benefited from an active calendar of corporate activity combined with a good equity market environment.

The hedge fund managers that lagged in March were primarily focused on long volatility equity strategies. These are typically funds which are included in the portfolio as protection against a sudden market dislocation. With S&P volatility falling below 8% this month and returning to some of its lowest levels ever, these managers lost some value as time decay on their option positions worked against them. Fixed income and mortgage arbitrage managers are also having a difficult time generating returns that exceed Libor. The flat yield curve, low volatility and tight spreads have made it difficult for managers to find arbitrage opportunities and realize profits on their trades. Gottex have reduced their positions in these strategies over the past few months and were therefore not significantly impacted by the lower returns.

Gottex’s outlook on hedge fund returns remains positive although the second and third quarters have historically been more difficult periods for hedge fund managers to generate returns. However the technicals in the market remain positive with less capital chasing an increasing set of opportunities, particularly in the event-driven equity space. They remain cautiously optimistic on the equity market overall, but believe that markets in Japan and Asia will likely continue their strong performance. Gottex remain defensive with respect to credit risk and have maintained positions with hedge fund managers that will perform well if the volatility in the market were to increase.

Outlook

Gottex’s broad outlook for the economy and financial markets has not changed. They feel that growth will continue to be strong, while productivity growth and globalization will continue to keep a lid on core inflation. The US labour market is getting tighter but they expect the US Federal Reserve to continue to push short term rates higher with 1 or 2 more 25 bps moves the most likely outcome. They think equity markets will continue to deliver solid returns, although valuations are less compelling than they have been. Gottex like Asian equity markets from a secular perspective and they feel that the US and Europe will lag behind Asia. Merger and acquisitions activity from corporations and private equity sponsors is expected to remain robust. As a result the environment for event driven trades will continue to be attractive. Spreads remain tight on many fixed income assets, but there continues to be strong technical pressures keeping spreads low. Gottex plan to maintain relatively low exposure to corporate credit, while they are neutral on mortgage and asset-backed securities. They are positioned with a long equity volatility bias in the portfolios. Gottex maintain that equity volatility is likely to increase in the US and in Europe, while it likely to stay at its recently elevated levels in Asian markets. They continue to favour the opportunities in non-traditional hedge fund strategies.

A table showing the history of official monthly NAVs of Bluewater Class A shares is available at the Westpac website under Structured Investments.

http://www.westpac.com.au/internet/publish.nsf/Content/PBISPSSI+Bluewater+performance

If you have any questions, please contact your Financial Adviser or Westpac on
1800 990 107.

1 Sourced from the administrator, Liberty Ermitage Luxembourg SA.
Information sourced from Gottex Monthly Reports

Westpac Banking Corporation has an interest in Bluewater A Shares, and in Bluewater Funds Management SPC.

Important Information
Bluewater Funds Management SPC ARBN 111 215 779 ('Bluewater') is the share issuer. Westpac Banking Corporation ABN 33 007 457 141 AFSL 233717 ('Westpac') is the provider of the Capital Guarantee, Investment Manager and Arranger.  Neither Bluewater nor Westpac nor any of their respective directors, officers, employees, associates or its subsidiaries guarantee or give any assurance in regards to the performance of the investment or its income return except in relation to the provision of the Capital Guarantee by Westpac.  The projections given above are predicative in character. Whilst every effort has been taken to ensure that the assumptions on which the projections are based are reasonable, the projections may be affected by incorrect assumptions or by known or unknown risks and uncertainties. The results ultimately achieved may differ substantially from these projections. 
This newsletter contains material provided directly by third parties.  While such material is published with the necessary permission, Westpac does not accept responsibility for the accuracy or completeness of, or endorses any such material.  Except where contrary to law Westpac does not accept any liability for such material.
The information in this newsletter is factual only. It does not constitute financial product advice. Before acting on this information you should seek independent financial and taxation advice to determine its appropriateness to your objectives, financial situation and needs
Past performance is not a reliable indicator of future performance.
Information is current as at 18 May 2006.