CHAIRMAN'S REPORT
FOR THE YEAR ENDED 31 MARCH 2011
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 2011.
A copy of the PSBG Fund and the PSBG KiwiSaver Scheme’s Financial Statements appear on pages 5 to 18 and pages 22 to 34 respectively of the Annual Report.
PSBG FUND INVESTMENT PERFORMANCE
Gross Return – 6.0% per annum
A solid return in a difficult investment environment characterised by volatility due to investor concerns following the global financial crisis. The volatile economic conditions have meant that a conservative and prudent approach to investment continues to be adopted by the Trustees to ensure that member’s interests are protected.
The PSBG fund has managed to maintain a fairly constant level of
net assets over the years despite these adverse conditions.
PSBG KIWISAVER SCHEME INVESTMENT PERFORMANCE
Gross Return – 7.97% per annum
The higher return this year reflects the widening of the PSBG KIwiSaver Investments to include equities which historically provide higher investment returns.
Since inception 1.8 million KiwiSaver accounts have been opened and due to the level of take up, the recent Budget announced that some of the Government benefits will be withdrawn or
be less favourable. Despite these proposed changes, which will be implemented if the Government is re-elected in November 2011, KiwiSaver schemes continue to be an attractive retirement savings option.
INVESTMENT MARKETS
New Zealand Shares
The New Zealand equity market, measured by the NZX50 Gross Index, produced a 5.3% return for the year ended 31 March 2011. The New Zealand equity market finished the March 2011 quarter on a 33 month high, with stocks likely to benefit from the Christchurch earthquake rebuild being the strongest performers.
Weak consumer demand due to consumer debt retirement and cost pressures from rising wages and raw material costs continue to impact on most sectors.
There is the prospect of increased economic activity associated with the Rugby World Cup hosting in September/October 2011 particularly in the retail sector, a probable reduction in the pace of debt retirement and the current OCR level of 2.50% has sparked interest in high dividend paying and growth stocks.
Australian Shares
The ASX200 Index return for the twelve month period to 31 March 2011 was 3.4% in local currency terms and 8.8% in New Zealand dollar terms.
The Australian market performance in the past year was well below the previous year’s results (41.7% in local currency terms and 47.9% in NZ dollar terms).
The global economic slowdown, along with tightening measures in China, impacted on the Australian market and the continuing strength of the Australian dollar meant that international investors repatriated profits.
International Markets
Global share markets have continued to recover since hitting lows in early 2009. A buy-and-hold strategy often provides better long-term returns when investing in growth assets such as global shares.
The MSCI World Gross Index produced a 14.0% return which equated to a 6.4% return in New Zealand dollar terms due to the strength of the New Zealand dollar during the year to 31 March 2011.
The performance of global markets during the year has been hindered by the sovereign debt issues in Europe (particularly Portugal, Ireland, Greece and Spain), the US economic position, the fall in the Japanese market following the catastrophic earthquake/tsunami and the continued conflict in the Middle East/North Africa which has produced higher oil and gold prices.
Property
The NZX Listed Property Index return for the year ended 31 March 2011 was 8.6%.
The New Zealand property sector has benefited from the lower interest rate environment, however minimal earnings growth is expected due to general economic conditions.
Fixed Interest Securities
The NZX Government Bond Index increased by 6.9% over the past year compared to 2.3% for the previous year.
The OCR remained at 2.50% from April 2009 until June 2010 when it was increased to 2.75% and a month later to 3.0%. The earthquake in Christchurch resulted in the OCR being lowered by 50 bps to 2.50% in March 2011 and it is anticipated that inflationary pressures may force the Reserve Bank to increase interest rates.
Conclusion
During the past year investment markets have witnessed natural disasters, currency volatility
a, failed finance companies, falling house prices, lower interest rates and general climate of investor nervousness.
Volatility continues to be a feature of all investment markets which are understandably becoming increasingly risk averse following the global financial crisis. Investor nervousness has been amplified by the natural disasters in Christchurch and Japan. Also the continuing sovereign debt issues in Europe and concerns regarding a possible US default on its debt payments further contribute to investor nervousness worldwide.
A well diversified investment portfolio, with local and offshore investments, across the main asset classes of cash, fixed interest, equities and property assists in combating the economic effects of these everyday events.
The PSBG Fund and the PSBG KiwiSaver Scheme continue to provide steady investment returns for members in their retirement. The Directors envisage if the global economic recovery continues then increased investment returns will be achieved in future years.
For the Directors
D J Ruegg – Chairman
Information for PSBG Fund Members
The Trustee certifies that:
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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.
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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 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.
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During the year the applicable return rates on withdrawals were:
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