The Individual Retirement Plan's funds are invested in the Mercer-GRT Funds with specialist managers through Stable, Balanced and Growth Funds. Over the year all three funds benefited from sound returns for all the major asset classes with excellent returns from shares and property providing an additional boost for investors in the Balanced and Growth Investment Funds.

Current Year Returns (from 1 January 2007)
The interim returns for each month of the current year (from 1 January 2007) are shown below in the table entitled "Monthly Declared Returns (% per month)"

Monthly Market Review
A review of the investment markets over the month of April 2008 is shown on the Selected Market Indicators page.

Current year’s returns (from 1 July 2007)
The following graphs compare the Individual Retirement Plan’s Managed Funds’ gross returns (before tax and fees) with those of other managed funds for the past three and five years to 30 September 2007 as reported in the 30 September 2007 AON Investment Update.

Notes:

While the charts show that the IRP Funds have produced competitive returns over both periods, results from the Growth and Balanced Funds have been slightly lower than the AON managers’ average and the AON median manager over the last three years. To reduce investment risk (that is, the risk of the Fund achieving a negative return) and to provide more consistent returns, the investment risk profile of both Funds requires a greater percentage of each Fund’s assets to be invested in income assets (fixed interest securities and cash) and less in growth assets (shares and property) than the average manager in the AON survey.

Net Returns (after tax, fees and expenses) for year to 30 June 2007

It is important to note that these returns are determined assuming funds have been invested for the full year (from 1 July 2006 to 30 June 2007). For individual members, returns may differ from this, depending on the timing

The actual net investment return credited to your member account balances is based on monthly declared returns (see chart below) and the balances in your accounts each month.

Monthly Declared Returns (% per month)

Returns Compared to Cash

Notes:

Performance Comparison
The IRP's performance in the past year - and its performance over longer timeframes - indicate that its returns continue to be competitive with other similar superannuation schemes.

Market surveys of similar investment funds demonstrate how competitive our investment returns are.

Gross returns over the past three and five years
The following graphs compare the IRP Managed Funds’ gross returns (before tax and fees) with those of other managed funds for the past three and five years to 30 June 2007.

As you can see, the IRP’s performance compares favourably, with the IRP Managed Funds producing comparable returns when compared to the average returns achieved by other managers as reported in the 30 June 2007 AON Investment Update (an independent quarterly market survey of investment managers’ returns, produced by AON Consulting).

Net returns over the past year, three and five years
Compare the IRP’s Managed Funds net returns (after tax at 33%, management fees and plan expenses) with other managers as reported in the Eriksen & Associates Survey (a quarterly market survey of investment managers produced by Eriksen & Associates - an independent investment consultancy firm). Again this emphasises the competitiveness of the IRP's returns - over the longer term, three and five years.

Source: The June 2007 market survey of investment managers by Eriksen & Associates, an independent investment consultancy firm.

Past returns and long-term performance
The following returns have been applied to all members accounts as at the respective 30 June year-end. They are net returns after tax (at 33%), the Plans management fees (0.80% p.a.) and Plan expenses have been deducted.

Long - term performance
The average annual net returns (credited to members’ accounts) over the last seven and ten years respectively have been:

*Allowing for tax at 33%

What actually happened in the last year?
Major influences on the global economy and markets during the year were:

• strong economic growth, particularly in Asia and Europe
• merger and acquisition activity
• further interest rate rises

In New Zealand, growth was stronger than expected, which highlighted inflation pressures and prompted the Reserve Bank to raise interest rates. Higher interest rates attracted money to New Zealand, pushing our dollar higher. Unfortunately these higher rates held back returns from New Zealand fixed interest investments.

Returns from New Zealand shares were boosted by continuing takeover activity. The Australian sharemarket benefited from the resource boom and strong economic performance, and provided another very strong result.

Although a plunge in the Chinese sharemarket in late February sparked a fall in global sharemarket returns, the Scheme’s investments in international shares performed well overall.

The strong New Zealand dollar had a detrimental effect on returns from the unhedged portion of the international shares investment portfolio.

The moderate returns from international fixed interest securities reflected volatile interest rates worldwide.

The Plan’s best returns came from hedged passive international shares and property, particularly New Zealand property as demand from both tenants and buyers continued to exceed supply.

Overall, the good returns from shares and property during the year, supported by more moderate returns from fixed interest securities, provided sound returns for Plan members.

Looking ahead
The world economy is entering its fifth consecutive year of economic growth. After a sharp slowing in recent months caused by the combination of a severe property recession and a sharp inventory correction, the US economy appears to be picking up. The news in the rest of the world is good too. Strong growth continues in Europe and the emerging economies, led by China and India, continue to perform strongly. Low unemployment is encouraging consumer spending and the overall outlook for the global economy is positive.  In fact, the global economy grew faster in 2006 than it has done in the 60 years since World War 2.

The fundamentals are not as good in New Zealand. Despite interest rates being at their highest levels since the late 1990s, the tight labour market is boosting consumer spending. Although the Reserve Bank intervened to sell the New Zealand dollar for the first time ever in June 2007, our dollar remains strong, particularly against the US dollar.

The past year has highlighted the fact that investment returns fluctuate. However, the investment strategy for each investment fund is designed to achieve sound long-term returns and to ride out any weaknesses that may occur from time to time.

Are You in the Right Fund?
It is good practice to occasionally review whether you are in the "right" Fund for your particular circumstances and in doing so you need to decide which investment objectives are the most important for you:

• If you want high returns, you will need to be comfortable with increasing risk (negative returns) in an environment where lower market returns may become more the norm.
• If you want to avoid negative returns, you will need to consider a more defensive strategy.