CHAIRMAN'S REPORT

FOR THE YEAR ENDED 31 MARCH 2009

On behalf of the Directors I present the Annual Report of the PSBG Fund and the PSBG KiwiSaver Scheme for the year ended 31 March 2009.

A copy of the PSBG Fund and the PSBG KiwiSaver Scheme’s Financial Statements appear on pages 5 to 18 and pages 22 to 30 of the Annual Report.

PSBG KIWISAVER SCHEME INVESTMENT PERFORMANCE

Gross Return – Positive 4.0% per annum

The PSBG KiwiSaver Scheme generated a positive 4.0% return for its first full year of operation. Given the ongoing volatility of investment markets the Directors have restricted PSBG KiwiSaver Scheme investments to those covered under the New Zealand Government Deposit Guarantee Scheme. The Guarantee Scheme covers both principal and interest and means that the PSBG KiwiSaver investments attract competitive returns for low risk.

The Government introduced changes to KiwiSaver legislation which took effect on 1 April 2009. The reduction of the minimum employee contribution rate to 2% of an employee’s salary or wages means that joining a KiwiSaver Scheme has become more attractive.

KiwiSaver Schemes continue to offer various incentives, including the $1,000 kick start grant to new members and also the annual member tax credit of up to $1,040 a year ($20 per week) provided members contribute the same amount.

PSBG FUND INVESTMENT PERFORMANCE

Gross Return – Negative 12.25% per annum (Negative 12.0% after tax)

The past year to 31 March 2009 has been one of the most difficult and frustrating in living memory for investment particularly in the equity market.

The New Zealand share market fell 25.4%, the Australian market by 26.6% and the UK market by 27.9% in New Zealand dollar terms. Similarly local and global short term interest rates have fallen to unprecedented levels as central banks have attempted to stimulate local economies.

New Zealand Shares

The New Zealand share market, as measured by the performance of the NZX50 Gross Index, fell by 25.4% during the year. From August 2008 onwards the NZ equity market declined sharply due to the global credit crisis which affected investors worldwide.

In March 2009 the downward trend on the New Zealand share market was arrested as share prices on average slowed their price declines and factored in the prospect of a difficult economic environment for the balance of the year.

For the quarter ending 31 March 2009 the NZ equity market fell by 4.6% compared with the MSCI World Index which recorded a 11.2% decline which indicates that the NZ market has been less affected than its international counterparts.

Australian Shares

For the year ended 31 March 2009 the ASX200 Index fell by 29.5% in local currency terms and by 26.6% in New Zealand dollar terms. As with the NZ market sentiment towards equities improved in March 2009 and the ASX200 finished the month up 7.1%.

The Australian market has been hit harder by the global credit crisis and share prices were trading at 50% average valuation discounts. Given this situation it is expected that the market will bottom out rather than continue to decline.

International Markets

The past 12 months have been a tumultuous year for global investment markets and one that most investors would probably prefer to forget.

The performance of the MSCI Index for the year to 31 March 2009 was negative 37.4% in local currency terms. A negative 20.9% return occurred in New Zealand dollar terms reflecting the positive effect of the depreciating dollar on the returns of offshore investments.

Property

The New Zealand listed property sector fared better than the broader New Zealand share market particularly due to the tax effective (PIE) yield. The lower relative debt levels of NZ listed entities compared to international counterparts are an added attraction.

The JB Were NZ Listed Property Index for the year to 31 March 2009 was negative 20.2%.

Fixed Interest Securities

Bonds typically perform well during periods of economic uncertainty and in an environment where interest rates are moving downwards.

The performance of the NZX Government Stock Index for the year to 31 March 2009 was 12.4%. Over the next few years the Government will need to increase their borrowing requirements to fund forecast deficits. To ensure uptake by investors higher NZ Government bond yields are likely to eventuate.

Trustees

Peter Mills resigned as a Trustee in February 2009 after serving on the Board of Trustees since 1994. I acknowledge the valuable contribution he has made over the years and his input will be missed.

We are pleased to welcome Judith Taylor as the new appointment by the NZ Architects
Co-operative Society Ltd.

Conclusion

Economic conditions have been particularly challenging for the world’s financial markets during the year to 31 March 2009. The shrinking of the global economy, due to the freezing up of credit markets during 2008, has resulted in negative returns in most investment markets apart from the fixed interest sector.

The range of initiatives introduced by Governments worldwide, including tax cuts, infrastructure spending programmes and the offering of guarantee schemes to banks and investors will hopefully underpin an economic recovery.

Historically equities are long term growth investments and eventually the equity markets move upwards to new highs. The forthcoming company reporting season will test the extent to which current share prices are factoring in the negative economic news and the anticipated reduction in earnings.

Generally investment markets have produced positive returns during the period to July 2009 and this provides encouragement that the downward slide of returns has been curtailed. Accordingly the Directors consider that, provided economic conditions remain stable, there will be positive PSBG Fund and KiwiSaver Scheme returns in future years.

For the Directors

D J Ruegg – Chairman

Information for PSBG Fund Members

The Trustee certifies that:

• All contributions required to be made to and all the benefits required to be paid from the Fund in accordance with the terms of the Trust Deed have been made.

• The market value of the assets of the Fund at the close of the financial year exceeded the total value of benefits that would have been payable had all the members of the Fund ceased to be members at that date and had provision been made for the continued payment of all benefits being paid to members and other beneficiaries as at the close of the financial year.

• During the year the applicable return rates on withdrawals were:

• The most recent prospectus for the PSBG Fund was registered on 7 November 2008