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The Board of the Guardians of New Zealand Superannuation today announced the investment returns for the New Zealand Superannuation Fund for the year to 30 June 2004.

The Fund began investing following the transfer of $2.40 billion in Treasury bills on 30 September 2003. An additional $1.39 billion in contributions was made to the Fund in the subsequent nine months to 30 June 2004. The balance of the Fund at 30 June 2004 was $3.985 billion. Investment income during the year (after fees but before tax) was $239 million.

The Fund's primary investment target is to exceed, before tax, the risk-free rate of return (effectively the yield on Treasury bills) by an average of at least 2.5% per annum over rolling 20-year periods. During its first nine months of operation this target was exceeded with an annualised (time-weighted) return of 10.4% compared to a risk-free rate, calculated on the same basis, of 5.3%.

Guardians' Chairman David May cautioned against reading too much into performance over such a short time period, given the long-term nature of the Fund's investment program.

"It is important to remember the long-term mandate that has been given to the Guardians for the investment of the Fund. Our focus will always be on building an investment strategy to deliver over future decades. Results over a period as short as one year should be seen in that context."

He said the Fund had accomplished what it set out to achieve in its first nine months.

"Over the first nine months, the portfolio was gradually transitioned from cash to be fully allocated to investment managers. There are now 15 managers appointed covering a range of mandates in fixed interest and equities."

However, in line with the Board's decision not to allocate assets to either property or other growth assets during the first year, the exposure to each of the above sectors has been temporarily increased to cover this. The Board plans to explore how best to address property and other growth assets in the 2004/5 year.

The performance in each sector was broadly in line with market indices (after fees). Many managers held their mandates for only a few months of the 2003/4 year and their effectiveness will be better judged over the full 2004/5 year.

For more information please contact:

Paul Costello, CEO, New Zealand Superannuation Fund, + 64 9 300 6980
Daniel Riordan, Media Relations, New Zealand Superannuation Fund, + 64 274 921 221

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