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Annual Report

2009/10

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table of contents / news / improving your super / investments / financial statements / contact

Table of contents This Annual Report was issued by LUCRF Pty Ltd ABN 18 005 502 090 AFSL 258481 RSE License No L0002981 as Trustee for the Labour Union Co-operative Retirement Fund (LUCRF Super) ABN 26 382 680 883 RSE Reg R1067521.

Back to basics A member story. . . . . . . . . . . . . . . . 4

Section 3 Investments. . . . . . . . . . . . . . . . . . 15 How the economy performed. . . . . . . . . . . . . . . . . . 15

Section 1 News/Reports from the Board Chairman’s Report. . . . . . . . . . . . . . . . . . . . . . . . . . 6 CEO’s Report. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Trustee Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Section 2 Improving your super experience. . . . . . . . . . . . . . . 11 New benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 New investment options. . . . . . . . . . . . . . . . . . . . . . 11 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Financial advice. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Free seminars. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Written communications . . . . . . . . . . . . . . . . . . . . 12 LUCRF Representatives . . . . . . . . . . . . . . . . . . . . . 12 New website . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Free investment education . . . . . . . . . . . . . . . . . . . 12 Our awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Annual investment returns – updating your balance. . . 16 Rollovers and other benefit payments . . . . . . . . . . . 16 Authorised early release payments . . . . . . . . . . . . . 16 Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Investment options. . . . . . . . . . . . . . . . . . . . . . . . . 17 The Balanced option. . . . . . . . . . . . . . . . . . . . . . . . . 17 Pre-mixed options . . . . . . . . . . . . . . . . . . . . . . . . . 18 Asset class options . . . . . . . . . . . . . . . . . . . . . . . . 20 Performance results. . . . . . . . . . . . . . . . . . . . . . . . 22

Section 4 Financial statements & other information. . . . . . . . . . . . . . . 25 Enquiries and complaints. . . . . . . . . . . . . . . . . . . . 25 Government supervision. . . . . . . . . . . . . . . . . . . . . 25 Identity fraud. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Reserves policy. . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Contribution arrears – what we do. . . . . . . . . . . . . . 26 Indemnity insurance. . . . . . . . . . . . . . . . . . . . . . . . 26 Transfer of benefits to an Eligible Rollover Fund (ERF). . . . 26 Unclaimed money. . . . . . . . . . . . . . . . . . . . . . . . . . . 27 List of key LUCRF Super service providers (as at 30 June 2010). . . . . . . . . . . 27

Contact. . . . . . . . . . . . . . . . . . . . . . 30 LUCRF Partners . . . . . . . . . . . . . . . . 31

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back to basics Speaking with Fiona Gibson, one thing is very clear; her family is a top priority. A hectic life in Melbourne with her husband (Campbell), both working full–time and raising their three children (Teal – 11, Hunter – 8, and Cooper – 5), left very little time to spare. This was enough to prompt the family to pack up and move to Launceston, Tasmania. Their new life in Launceston is centred on the idea of ‘getting back to basics’. The beauty and relaxed pace of life in this town has provided a much needed reprieve from their bustling life in Melbourne. The children are enjoying their new school and the time, space and outdoor activities that have been introduced to their daily routine. Fortunate to be living on a farm, the children now have real life responsibilities, helping feed the horses and livestock, gaining a better understanding and appreciation of where things come from and how things grow. Fiona believes this lifestyle is teaching her children valuable skills that they just didn’t have the opportunity to learn in the city. When friends ask whether it was the right move for them? She responds every time, “It’s the best decision my husband and I have ever made for our family, life is just that much simpler!”. This lifestyle change has meant better quality time as a family and has refreshed their outlook on life. New lifestyle, new city and new jobs haven’t meant a change of super for this family. When asking Fiona why they’ve stayed with LUCRF Super, she replies, “It’s a fund we know and trust, because we’ve always felt they’ve had our best interests in mind – one of those funds that are always about the members”.

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table of contents / news / improving your super / investments / financial statements / contact

The year in review

CEO Report

Charlie Donnelly

Greg Sword

The Australian superannuation industry has grown quickly in the last decade, becoming one of the most significant sectors in our economy. This industry manages over $1.1 trillion in assets, accounting for 1.8 per cent of Australia’s economic growth. Superannuation plays an essential role in the Australian economy by addressing the long-term challenges of an ageing population with the responsibility of growing the nation’s savings and providing access to capital for Australia’s financial sector. With the sector legislated to grow, both in importance and size, it is only appropriate that this industry attracts substantial public and government attention. Superannuation is one of the most important investments we make in our lives, affecting every Australian. It is usually the largest asset you will accumulate, besides your family home. Your superannuation will be the security that you rely on to enjoy a better quality of life in retirement. This could impact you even earlier if due to illness or other circumstances you are no longer able to work. The policies that the Government are focussing on are important as this will help shape your future. The past twelve months have seen the release of three comprehensive Government reviews of our superannuation system. These were the Henry, Cooper and Ripoll reviews. The recommendations from these reviews have prompted much discussion in the public arena, with proposed reforms standing to have a major impact on the retirement savings of millions of Australians for years to come, laying the foundations for ongoing reforms.

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Most reforms proposed by the Government, such as the gradual increase of the Superannuation Guarantee from 9 to 12 per cent, would see super accounts boosted for the average worker, as well as an increase in the national retirement savings by half a trillion dollars. If successfully implemented, most of the proposals will benefit LUCRF Super members through specific initiatives that help grow the retirement savings of low-income workers, women, and those approaching retirement. This Annual Report outlines our commitment to meeting the challenges that lie ahead, revealing some of the initiatives and improvements we have undertaken in order to place the Fund in a leading position in the Australian superannuation industry. On behalf of the LUCRF Board, I would like to thank you for your continued loyalty and support throughout the year. I would also like to acknowledge LUCRF staff, our participating employers and the National Union of Workers for their hard work and dedication in 2009/10. We remain committed to meeting the ongoing needs of our members for generations to come and have every confidence that we will continue to grow and build on our proven success in the future.

The 2009–2010 year has seen the beginning of a recovery from the Global Financial Crisis and a welcome return to positive earning rates more in line with LUCRF’s long term objective of inflation rate plus 4%. LUCRF did position conservatively at the beginning of the 2009/2010 year because the markets were volatile and there was widespread concern of a possible double dip in the markets. Our earning rate this year in part reflects this approach. LUCRF staff have worked hard over the past year to bring to members an improved range of services and investment options in the new financial year. These new services include a new range of ‘Member Investment Choice’ options, a Member Investment Advisory Service and a significantly improved insurance offer. The new advisory service, coupled with the new investment options, provides members an opportunity to seek personal advice about investment issues and obtain assistance with the important decisions about how best to position for the future. These services are important for all members but are particularly relevant for those who are approaching the retirement horizon. I urge members to take advantage of these services to build a better retirement outcome.

We have been able to introduce these new services without causing an increase in the current level of member fees. Fees for accumulation and pension members will remain at the current level of $1.25 per week with the Balanced (default) fund MER at 0.69%. Fund staff will continue to look for ways to provide a better fund and we are always happy to take advice from members about how best to make improvements. The Fund will be arranging a series of seminars for members in the 2010/2011 year and I urge members to attend if possible, not only to learn about super but to engage Fund staff in conversations about the future. Thank you to all of our staff for their hard work over the past year and our members, who have travelled with us, remained with us when they have changed jobs, and made LUCRF their fund of choice.

Greg Sword AM CEO

Charlie Donnelly Chairman

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Pictured: Back Row from left – Antony Thow, David O’Sullivan, Raymond Tanner, Caterina Cinnani, Gary Maas, Jeff Doyle, Christopher Brown and Tony O’Grady. Front row from left – Tim Kennedy, John Carlile (Deputy Chairman), Charlie Donnelly (Chairman) and Ted Eftimiadis.

the

Trustee board The LUCRF Trustee Board is made up of: •• Five Employee Representative Directors •• Five Employer Representative Directors, and •• Two Independent Directors.

Employee Representative Directors Charlie Donnelly (Chairman) General Secretary National Union of Workers Tim Kennedy Victorian Branch Secretary National Union of Workers Gary Maas Legal Officer National Union of Workers Antony Thow Executive Director LUCRF Pty Ltd Caterina Cinanni Lead Organiser National Union of Workers (appointed 21 April 2010)

Employer Representative Directors John Carlile (Deputy Chairman) Consultant Christopher Brown Managing Director Tourism and Transport Forum (TTF) Jeff Doyle CEO Adecco Group Raymond Tanner Consultant

Appointment to the Board

Trust Deed

The Fund’s Trust Deed and Rules sets out the procedure for appointing Directors. The General Secretary of the National Union of Workers nominates Employee Representatives in writing. Employer Representatives and Independent Directors are appointed on the recommendations of nominating committees.

A copy of our Trust Deed and Rules is available by calling us on 1300 130 780 or sending an email request to mypartner@lucrf.com.au

Committees The Trustee Board has appointed four Committees that advise it. Members of each Board Committee at 30 June 2010 are detailed below: COMPLIANCE & AUDIT COMMITTEE John Carlile, Tim Kennedy, David O’Sullivan*. MEMBERSHIP SERVICES COMMITTEE

Ted Eftimiadis Employee Relations Manager Pacific Brands

Christopher Brown, Charlie Donnelly, Jeff Doyle, Raymond Tanner*.

Independent Directors

INVESTMENT COMMITTEE

David O’Sullivan Partner IFS Legal

Tony O’Grady, Tim Kennedy, Raymond Tanner, Antony Thow*.

Tony O’Grady Associate Partner Corporate Value Associates

CHANGES TO THE TRUST DEED The way in which the Fund is governed and controlled is established through a legal document – the Trust Deed and Rules. During the year, amendments were made to reflect changes to legislation and regulations affecting super and other operational matters such as: •• Benefit payments in the event of death •• The treatment by the Trustee of separate investments in a common fund ••

Extending the definition of child, spouse and de-facto, recognising same sex partners and their children on the same basis as partners of opposite sex and their children, and

•• Enabling the payment of benefits in the event of terminal illness.

MANAGEMENT COMMITTEE John Carlile*, Charlie Donnelly, Gary Maas, Ted Eftimiadis. *Chairman

Tim Lyons Assistant Secretary ACTU (resigned 22 January 2010) We would like to thank Tim for his contribution

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Improving your super experience This section outlines LUCRF’s current services available as well as new developments and benefits we are working towards. All these benefits and services have been developed to improve the super experience of all our members and employers.

New benefits

Insurance

We believe our responsibility as a super fund and financial partner to our (185,000) members is much greater than just investment returns and low fees. By continually improving our offerings, we are helping you make the make the most of your finances, providing the security you need to enjoy a better quality of life in retirement.

LUCRF Super has worked hard to further improve its insurance offerings for members by negotiating with its Insurer an increase in Automatic Acceptance Limits (AAL). This means that members will be able to upgrade their insurance cover to a maximum of 4 units of Death & TPD or 6 units of Death Only cover, without needing to provide medical evidence.

New investment options

We have also extended our insurance offerings by introducing ‘fixed cover’. Fixed cover insurance is where you select to be covered for a specific dollar amount, e.g. $300,000. Fixed cover does not change as you age, however, the premium you pay may increase depending on your age.

LUCRF is introducing three additional investment options from 1 September 2010, giving you a total of nine different investment options to choose from. You can either choose one investment option or a combination of the options available. These new options are pre-defined by our investment team, with varying proportions of growth and defensive assets. This variation provides different benefits and levels of risk, depending on the asset mix. We have called these new Pre-mixed options: •• Conservative •• Moderate, and •• High Growth. We still believe that the Balanced (default) option is the appropriate long-term strategy for the majority of our members, we are simply extending our offerings so that members have more choice with their investment options.

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To find out more about LUCRF’s new investment options you can go to our website www.lucrf.com.au or call us on 1300 130 780.

We look forward to announcing when our members can take advantage of these new offerings in the upcoming months. Further information can be found on our website.

Financial advice LUCRF Super is leading the way by introducing personal financial advice services to our members. ASIC approved the extension of our licence on 19 May 2010 and the service will be ready for our members to take advantage of before the end of the year. We will be offering advice on a range of investments, including those held outside superannuation. One of the driving forces behind offering this service was that our members were looking to us for financial advice during the economic downturn. All our advisers are employees of the Fund and do not receive commissions. Advice regarding superannuation and pension options is generally free of charge.

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Free seminars

New website

Our awards

PLATINUM RATING

These seminars are a forum to learn more about investments, retirement and the choices available to you. These are available to our members and contributing employers, delivered nationally at workplaces, as well as at our head office in Docklands, Melbourne. Call us on 1300 130 780 for further details.

WWW.LUCRF.COM.AU

REGISTERED FOR A GREEN STAR RATING

Our latest research shows that our members want an effective online tool and our employers want simple and streamlined administration processes.

LUCRF Super is proud to announce that our Docklands premises has been registered for a Green Star – office interiors rating with the Green Building Council of Australia (GBCA). GBCA developed the rating system as a national, voluntary assessment tool that evaluates the environmental design and the adoption of green building practices. LUCRF Super takes environmental issues seriously and we are proud to have registered our fitout project with the GBCA.

LUCRF Super has recently been awarded a Platinum Rating, the highest possible, for both Pension and Super products.

Written communications Information contained in this Annual Report, on our website and in editions of MySuper and MyPension (our member newsletters) will all help you to gain a better understanding of what superannuation is and the choices available to you. We also have fact sheets covering a range of financial topics available in several languages, which are available on our website.

LUCRF Representatives Our LUCRF Representatives are always happy to assist you, providing information and imparting knowledge. LUCRF Representatives include: •• Business Development Managers (BDM’s) •• Member Education Managers •• Financial Advisers •• Contact Centre staff

We’ve listened to you and are working towards improving our online services. In order to enhance our online capabilities, we are redeveloping the LUCRF Super website including Members Online and Employers Online facilities. These facilities will enable you to transact online and check your super balance. You can also update your details and check that your contributions have been paid. We anticipate to providing a more user-friendly website and enjoyable online experience for everyone in the coming months. Please check out our new website and let us know what you think.

Free investment education There are many factors you should consider when making an investment choice. Part of our commitment to members is to help you learn more about all aspects of super, retirement and the investment options available to you. We aim to provide you with the education and knowledge that will help you make informed decisions about your future.

AAA RATING LUCRF Super has again received an AAA rating by SelectingSuper, whose independent assessment rates the quality of a super fund by examining, reviewing, comparing and assessing funds to give a clear indication of their market position. The AAA rating means that SelectingSuper considers the Fund to be of very high-quality, well managed, competitively priced and has a strong track record of demonstrated success with a strong range of useful features that is likely to appeal to its membership.

This rating is given by SuperRatings, an independent rating agency that assesses over 500 of Australia’s largest multi-employer super funds, personal super and pension funds. The criteria that help form the ratings include investments, fees and charges, administration, advice, governance, insurance and qualitative overlay. 5 APPLES LUCRF Super has received the highly regarded Chant West 5 Apples rating, the highest possible, for the Super and Pension plans. Chant West is an independent specialist superannuation research and consultancy firm that provides an assessment of funds. The criteria that help form the ratings include investments, fees, insurance, administration, member services and employer services.

All our LUCRF Representatives can be contacted on 1300 130 780.

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Investments

How the economy performed Prepared by Towers Watson •• LUCRF Super’s specialist asset allocation consultant •• Oldest actuarial consultant in the world (est. 1878) In Australia this financial year, we saw: •• Economic growth at an annual rate of 2.7%* (year to 31 March 2010 ) •• Reserve Bank of Australia (RBA) raise interest rates six times, from 3.0% to 4.5% •• The Australian share market perform strongly for the first three quarters of the financial year ••

The Australian dollar experience significant price movements, starting at US77.5 cents increasing to a high of US93.7 cents, before ending the year at US87.0 cents.

AUSTRALIA The Australian economy continued to recover from the global financial crisis and outperformed many developed economies. Unemployment fell from 5.8% to 5.1% over the financial year and inflation (year to 31 March 2010) was 2.9%. The combination of these factors led the RBA to increase interest rates from 3.0% to 4.5%. GLOBAL ECONOMY

helping to build your future 14

While Asian economies rebounded nicely, China contributing strongly to global growth at a rate of 10.7%*, European countries struggled with high budget deficits and debt levels. Unemployment rates were at 9.5% for the US, 10% in Europe and 7.9% for both the UK and Canada at the end of the financial year.

The European Union (EU) and the International Monetary Fund (IMF) created a $1 trillion bailout package, coupled with government programs to help combat the high levels of debt experienced by major developed countries. AUSTRALIAN SHARES Investment options with large investments in the share market benefited from a solid performance, with the S&P/ASX 300 Accumulation Index returning 13.1% over the year. INTERNATIONAL SHARES Global share markets also improved during the first half, slowing for the rest of the year due to concerns about sovereign debt and mixed economic data from the US. PROPERTY Market performance improved this year with some property fund managers continuing to shed excess debt which improved market conditions, helping build investor confidence. The Fund’s Property Option performed strongly over the year, with S&P/ASX300 Property Accumulation Index returning 20.3%. CASH AND FIXED INTEREST Global fixed interest markets returned 10.6% for the year, outperforming the Australian market which had a return of 7.86%. The Australian 90 Day Bank Bill returned 3.9% for the year, providing solid returns to those invested in the Cash option. Credit markets continued to improve over the year which positively impacted LUCRF’s investments that contained credit exposures.

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LOOKING FORWARD European sovereign debt issues coupled with reduced spending will slow growth and with recent mixed economic data from the US this creates global uncertainty and concerns of another recession. Many will look to China as a source of global growth, with a focus for governments around the world improving financial regulation to avoid another global financial crisis. Please note: This investment commentary does not constitute advice. All investment figures quoted relate to before-tax performance of the relevant industry benchmark. *inflation adjusted annual rate

JARGON Inflation: Upward price movement of goods and services in the economy. Budget deficits: When spending exceeds income. Australian 90 Day Bank Bill: Australia’s benchmark indicator for short-term interest rates.

Annual investment returns – updating your balance At the end of each financial year, we calculate the final return on investment (ROI) for our members. This percentage (positive if your option has made money, negative if it has not) is then applied to your balance and adjusted accordingly. This process takes a couple of months after 30 June, and once finalised we send you a statement outlining how your account balance has performed over the course of the year (or since you joined if you are a relatively new member).

Rollovers and other benefit payments

Investment options LUCRF Super offered six investment options during the financial year 2009/10. •• Balanced (default) •• Cash •• Indexed Shares •• Australian Shares •• International Shares, and •• Property From 1 September 2010, we are introducing three new Pre-mixed (also known as diversified) options made up of a blend of asset classes.

Where you request to rollover your balance to other superannuation or pension funds, full or partial benefit payments (commutations) and Death and Total & Permanent Disablement payments, you will receive the latest rates (post date of receipt of the benefit payment request) and then the net cash rate to the date of payment.

•• Conservative

Authorised early release payments

•• Moderate, and

Compassionate (APRA approved) and financial hardship payments will receive the most recent rate and then the net cash rate to the date of payment.

•• High Growth.

Please note: The net cash rate is the after-tax rate determined by LUCRF Super.

Investments At 30 June 2010, the following investments exceeded 5% of the Fund’s total assets: PIMCO (Pooled Fund)..........................................6.42% Members Equity – Cash Management Accounts........5.97%

They are designed similarly to our Balanced (default) option, which is explained at right, however they have different levels of growth and defensive assets that spread the risk. These new options are:

INVESTMENT MANAGERS Arrowstreet Capital LP Apostle Asset Management Limited Bell Asset Management Limited Bridgewater Associates Inc. Colonial First State Asset Management (Australia) Limited Commonwealth Bank of Australia DFA Australia (Dimensional) JF Capital Partners Ltd JPM Chase Bank, National Association (Sydney Branch) Karara Capital Limited Lazard Asset Management Pacific Co. Macquarie Investment Management Limited ME Portfolio Management Pty Ltd

MFS Investment Management Northcape Capital Pty Ltd Perpetual Investment Management Limited PIMCO Australia Pty Ltd QIC Limited Schroder Investment Management Australia Limited Stone Harbor Investment Partners LP Vanguard Investments Australia Ltd Vianova Asset Management Pty Ltd INVESTMENT ADVISORS AND CONSULTANTS Arcadia Funds Management Limited Bell Asset Management Limited Sovereign Investment Research Pty Ltd Thomas Murray (Australasia) Pty Ltd Towers Watson ASSET ALLOCATION CONSULTANT Towers Watson

The Balanced Option Our Balanced (default) investment option is designed to offer both growth and protection over the long-term. This option also mixes growth and defensive assets and gives you a broad range of investments with the majority in shares, property, fixed income and alternatives. The approach of our Balanced (default) option is to allow the Fund to capture growth as the markets rise, whilst providing a measure of stability when the markets are volatile. Since our inception in 1978, the Balanced (default) option has produced an average annual return of 10.03% (1978 to 2010) to our members. Even though past returns are no guarantee of future investment performance, our history over more than 30 years does show that despite investment markets moving up and down, our Balanced (default) option has provided a healthy return over the long-term.

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6% 37% 17.5%

table of contents / news / improving your super / investments / financial statements / contact 17.5%

15% 7%

PRE-MIXED OPTIONS

Each option contains a mix of growth and defensive asset classes (diversified)

Balanced (default )

Investment objective

This is the investment option that most members are in and the option to which your super automatically invests in (defaults to), unless you instruct us otherwise.

To achieve a return (net of tax and investment expenses) that exceeds the increase in the CPI by at least 4% per year over moving 10 year periods, and to limit the probability of achieving a negative return to approximately 1 year in 5.

Investment strategy To invest in a diversified range of investments, with approximately 73% in shares, growth property and alternative investments, and approximately 27% in cash, fixed income and defensive property.

Risk of short-term negative return

Growth...........................73%

Investment fee#

Defensive......................27%

Moderate The return obtained each year will fluctuate and will be negative from time to time. There is a moderate chance that the return in any 1 year will be negative.

High Growth

Strategic asset allocation ^ 14% 20%

2%

Investment strategy

26%

12% 26%

To invest in a diversified range of investments, with approximately 95% in shares, growth property and alternative investments, and approximately 5% in defensive property.

%

Ranges

Australian shares

26%

22–36%

International shares

26%

22–36%

Growth.............................95%

2% 12%

3–15%

Defensive...........................5%

20%

8–25%

14%

5–20%

2%

0–10%

Property

14% 20%

Alternatives 12%

21%

Fixed interest

11.5%

26%

Cash

40%

0.69%

26%

11.5%

Investment objective To achieve a return (net of tax and investment expenses) that exceeds the

increase in the CPI by at least 5% per year over moving 10 year periods, and to limit the probability of achieving a negative return to approximately 1 year in 4.

Strategic asset allocation ^ 7%

34.5%

Risk of short-term negative return Moderate to High The return obtained each year will fluctuate significantly and will be negative from time to time. There is a moderate to high chance that the return in any 1 year will be negative. Investment fee# 0.75%

24%

34.5%

%

Ranges

Australian shares

34.5%

25–45%

International shares

34.5%

25–45%

7%

2–15%

24%

10–30%

Fixed interest

0%

0–5%

Cash

0%

0–5%

Property Alternatives

10% 6%

Conservative Investment strategy To invest in a diversified range of investments, with approximately 30% in shares, growth property and alternative investments, and approximately 70% in cash, fixed income and defensive property. Growth.............................30% Defensive........................70%

Investment objective

14%

Low The return obtained each year will fluctuate and will be negative from time to time. There is a low chance that the return in any 1 year will be negative. Investment fee#

2%

Strategic asset 20% allocation ^

To achieve a return (net of tax and investment expenses) that exceeds the increase in the CPI by at least 2% per year over moving 5 year periods, and to limit the probability of achieving a negative return to approximately 1 year in 14. Risk of short-term negative return

#The investment fee is a measure of the fees deducted from investments. These fees include the cost of the Fund’s investment managers, custodian and investment advisor and certain other costs of the Fund. The investment fee is the total of these costs, divided by the net asset value of the Fund. These fees are deducted directly from the investment earnings before they are allocated to member accounts. They are therefore not deducted from your super account directly.

12%

26%

21%

^Strategic asset allocation as at 18 August 2010.

11.5%

26% 40%

PLEASE NOTE: The Conservative, Moderate and High Growth Options commenced on 1 September 2010.

11.5% 6% 37% 6%

10% 17.5% 17.5%%

Ranges

Australian shares

11.5%

5–15%

International shares

11.5%

5–15%

15% 7%

21%

Property

10%

4–17%

6%

2–12%

11.5%

Alternatives 40%

6%11.5%

40%

Fixed interest 37% Cash

6%

10% 17.5% 21%

20–55% 15–35%

0.48% 15% 7%

Moderate Investment strategy To invest in a diversified range of investments, with approximately 50% in shares, growth property and alternative investments, and approximately 50% in cash, fixed income and defensive property. Growth.............................50% Defensive........................50% Investment objective To achieve a return (net of tax and investment expenses) that exceeds the

increase in the CPI by at least 3% per year over moving 5 year periods, and to limit the probability of achieving a negative return to approximately 1 year in 7.

Investment fee# 0.60%

34.5%

34.5%

Strategic asset allocation ^ 6% 37% 17.5%

Risk of short-term negative return Low to Moderate The return obtained each year will fluctuate and will be negative from time to time. There is a low to moderate chance that the return in any 1 year will be negative.

17.5% 24% 7%

15% 7%

17.5% 24% 7%

% 34.5%

34.5%

Ranges

Australian shares

17.5%

10–25%

International shares

17.5%

10–25%

7%

2–15%

Property Alternatives

15%

6–18%

Fixed interest

37%

25–50%

6%

0–15%

Cash

7%

34.5%

24%

34.5%

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50%

100%

ASSET CLASS OPTIONS

Cash Investment strategy To invest in a portfolio consisting primarily of bank deposits, but which may include other short-term securities. Growth................................0% Defensive..................... 100%

Each option invests in a single asset class

Investment objective

International Shares

Strategic asset allocation ^

To achieve a return (gross of tax and investment expenses) that is equal to the UBSA Bank Bill Index and to eliminate the probability of a negative return.

Investment strategy To invest in International shares on an actively managed basis.

100%

Risk of short-term negative return

Growth.......................... 100%

Very low The chance of a negative return in any 1 year is very low. Investment fee# 0.20%

Cash

%

Ranges

100%

0–10%

Defensive...........................0% Investment objective To achieve a return (gross of tax and investment expenses) that exceeds the change in the MSCI World (ex-Australia)

50% 100%

Accumulation Index over moving 3 year periods, and to limit the probability of achieving a negative return to approximately 1 year in 3. Risk of short-term negative return High The return obtained each year will fluctuate significantly and will be negative from time to time. There is a high chance that the return in any 1 year will be negative.

Indexed Shares

the S&P/ASX300 Accumulation Index and the MSCI World (ex-Australia) Ac-

Investment strategy

cumulation Index over moving 3 year periods, and to limit the probability of achieving a negative return to approximately 1 year in 4.

Growth.......................... 100% Defensive...........................0% Investment objective To achieve a return (gross of tax and investment expenses) that matches the change in a 50%/50% combination of

High The return obtained each year will fluctuate significantly and will be negative from time to time. There is a high chance that the return in any 1 year will be negative. Investment fee#

To invest in Australian shares on an actively managed basis.

Risk of short-term negative return

Defensive...........................0% Investment objective To achieve a return (gross of tax and investment expenses) that exceeds the change in the S&P/ASX300 Accumula-

100% 100%

0.65%

year in 3.

High The return obtained each year will fluctuate significantly and will be negative from time to time. There is a high chance that the return in any 1 year will be negative.

Property

erty Trust Index over moving 3 year periods, and to limit the probability of

Investment strategy

achieving a negative return to approximately 1 year in 3.

To invest in listed property trusts on a passive basis.

50%

Growth.......................... 100% Defensive...........................0% %

Ranges

Australian shares

50%

48–52%*

International shares

50%

48–52%*

50%

100% 100%

Investment objective To achieve a return (gross of tax and investment expenses) that equals the change in the S&P/ASX300 Prop-

100% 100%

% International shares

100%*

Risk of short-term negative return High The return obtained each year will fluctuate significantly and will be negative from time to time. There is a high chance that the return in any 1 year will be negative.

100% 100%

Strategic asset allocation ^

100%

% Listed property trusts

100%*

Investment fee# 0.39%

50%

0.39%

Investment strategy

Growth.......................... 100%

50%

Risk of short-term negative return

tion Index over moving 3 year periods, and to limit the probability of achieving a negative return to approximately 1

Australian Shares

Strategic asset allocation ^

Strategic asset allocation ^

Investment fee#

50%

To invest in shares on a passive basis, with approximately half in Australian shares and the balance in International shares.

50%

*From time to time the investment managers may hold cash.

Strategic asset allocation ^

100% 100% 100%

% Australian shares

100%*

Investment fee# 0.60%

100% 100%

100%

20

21


table of contents / news / improving your super / investments / financial statements / contact

Performance results Monthly declared results 2009/10

Crediting rates

LUCRF Super Monthly Rates Balanced

Crediting Rates financial years 1 July to 30 June and historical Cash

Indexed Shares

Australian Shares

International Shares

Property

July 2009

2.81%

0.17%

     5.79%      

6.97%

4.55%

2.07%

August 2009

2.13%

0.18%

     4.03%      

6.80%

1.30%

14.59%

September 2009

2.36%

0.17%

     2.24%      

5.55%

1.68%

8.93%

(1.48%)

0.19%

     (2.78%)      

(2.08%)

(1.63%)

(8.24%)

1.31%

0.21%

     2.04%      

1.64%

2.59%

1.01%

October 2009 November 2009 December 2009

2006/ 07

2005/ 06

2004/ 05

5 Year 10 Year Average Average 2006–10 2001–10

(6.49%)

16.02%

16.60%

14.00%

3.26%

4.05%

Cash

3.02%

3.77%

5.43%

4.95%

4.48%

5.00%

4.33%

4.43%

Indexed Shares

6.80%

(16.78%)

(16.14%)

16.43%

18.80%

12.85%

0.61%

0.92%

15.06%

(16.80%)

(12.35%)

26.79%

18.89%

4.81%

6.47%

(16.19%)

(19.40%)

6.91%

14.49%

(2.52%)

16.02%

(34.40%)

(34.73%)

24.87%

10.99%

(7.19%)

Australian Shares

0.24%

     3.16%      

4.01%

2.98%

2.80%

0.24%

     (4.11%)      

(5.27%)

(3.29%)

(2.65%)

February 2010

0.55%

0.21%

     1.14%      

1.19%

1.37%

1.19%

International Shares

March 2010

2.92%

0.24%

     4.07%      

5.94%

3.88%

0.12%

Property

April 2010

(0.09%)

0.31%

     (1.25%)      

(0.69%)

(1.14%)

3.31%

May 2010

(2.36%)

0.48%

     (3.64%)      

(6.38%)

(2.96%)

(3.87%)

June 2010

(1.07%)

0.36%

     (3.41%)      

(2.36%)

(2.65%)

(2.42%)

20 Year Average 7.30%

Average Since inception 10.03%

*This is the investment option that most members are in and the option which your super investment automatically defaults to, unless you instruct otherwise. PLEASE NOTE: The International Shares, Australian Shares, Property and Australian Fixed Interest investment options were introduced on 22 July 2005, hence there are only 2009/10, 2008/09, 2007/08, 2006/07 and 2005/06 crediting rates available for these options. The Indexed Shares and Cash options were introduced in 2000/2001. Past performance is not an indicator of future investment returns.

Cash

Indexed Shares

Australian Shares

International Shares

Property

July 2009

3.26%

0.21%

6.67%

8.18%

5.13%

2.35%

August 2009

2.46%

0.22%

4.54%

7.83%

1.50%

16.31%

September 2009

2.71%

0.21%

2.53%

6.39%

1.90%

9.99%

(1.67%)

0.24%

(2.81%)

(2.34%)

(1.85%)

(9.09%)

November 2009

2007/ 08

(13.37%)

2.22%

October 2009

2008/ 09

7.11%

(2.18%)

Balanced

2009/ 10

Balanced*

January 2010

LUCRF Pensions Monthly Rates

22

Accumulation Rates

2.32%

1.91%

2.98%

1.18%

Crediting Rates financial years 1 July to 30 June and historical Pension Rates

4.62%

4.56%

6.67%

5.28%

9.03%

(17.02%)

(17.10%)

(9.14%)

19.02%

(17.59%)

(12.33%)

(4.91%)

8.98%

(18.13%)

(20.52%)

(10.82%)

19.55%

(37.92%)

(37.49%)

(22.59%)

0.29%

3.60%

4.61%

3.44%

3.18%

(2.46%)

0.29%

(4.32%)

(5.97%)

(3.71%)

(2.92%)

February 2010

 0.65%

0.25%

1.27%

1.38%

1.58%

1.33%

Australian Shares

March 2010

3.36%

0.29%

4.54%

6.83%

4.44%

0.14%

International Shares Property

(0.77%)

(1.29%)

3.84%

May 2010

(2.65%)

0.58%

(4.02%)

(7.22%)

(3.30%)

(4.28%)

June 2010

(0.98%)

1.30%

(3.66%)

(1.60%)

(1.76%)

(1.88%)

(4.31%)

Cash

2.57%

January 2010

(1.22%)

(6.20%)

Indexed Shares

December 2009

0.37%

2007/08

(14.06%)

8.71%

0.26%

(0.08%)

2008/09

Balanced*

1.52%

April 2010

2009/10

3 Year Average 2008–10

Average since inception (Balanced Only) (0.43%)

#LUCRF Super and LUCRF Pensions returns differ because income earned from investments that support LUCRF Pensions are exempt from tax.

23


Financial statements and other information

Enquiries and complaints

Government supervision

Enquiries and complaints can be made in writing or verbally. Should you wish to make a complaint in writing, please address correspondence to:

LUCRF Pty Ltd is the Trustee of the Labour Union Co-operative Retirement Fund (LUCRF Super) and complies with the requirements of the Superannuation Industry (Supervision) Act 1993, the Corporations Act 2001 and other relevant legislation.

Complaints Officer, LUCRF Super PO Box 211 North Melbourne VIC 3051 Complaints can be made by a Fund member, a previous member, a non-member spouse (re: Family Law split agreement), or from a dependant (beneficiary/ies) or legal representative of a deceased member. Responses from the Fund will be dealt with promptly and certainly within 90 days as required by Government regulation. If you are not satisfied with our response or handling of a complaint, you may be entitled to lodge a complaint with the Superannuation Complaints Tribunal (SCT), which is a free service. SUPERANNUATION COMPLAINTS TRIBUNAL Locked Bag 3060 GPO Melbourne VIC 3001 Telephone: 1300 884 114 Web: www.sct.gov.au If your complaint is outside the jurisdiction of the SCT and you are not satisfied with the handling of your complaint, or you have not received a response within 45 days, you may be able to take your complaint to the Financial Ombudsman Service, which is also a free service.

giving you peace of mind 24

FINANCIAL OMBUDSMAN SERVICE GPO Box 3 Melbourne VIC 3001 Telephone: 1300 780 808 Web: www.fos.org.au

The Australian Prudential Regulation Authority (APRA) has approved LUCRF Pty Ltd as the holder of a Registrable Superannuation Entity Licence (L0002981) and LUCRF Super as a Registrable Superannuation Entity (R1067521). An Australian Financial Services Licence was also granted to LUCRF Pty Ltd (AFSL No. 258481) by the Australian Securities Investment Commission (ASIC) which enables personal financial advice to be provided. The Trustee is also approved to operate a non-cash payment facility (clearing house).

Identity fraud You may have heard of identity fraud. It is when someone steals (or tricks you into providing) your personal details to commit financial fraud. While this seems to mainly occur with bank accounts (where certain undesirable people will use your personal details to access your accounts via phone, internet or writing bad cheques), your super could also be a target. If you receive calls or emails requesting your personal details, please be aware that responding to this could leave you open to fraud. You should never provide your personal details to anyone. You can visit the ASIC FIDO website at www.fido.gov.au for useful superannuation information and exposed super scam updates.

The Australian Securities and Investment Service (ASIC) also has an infoline on 1300 300 630 which you may use to make a complaint and obtain information about your rights.

25


table of contents / news / improving your super / investments / financial statements / contact

Reserves policy

Contribution arrears – what we do

Unclaimed money

The Trustee maintains three reserves. This makes no difference to the fees or charges you pay as a member of LUCRF Super.

Legislation requires employers to pay contributions by certain due dates. When an employer fails to do this, (once aware), the Fund endeavours to resolve these situations within a reasonable period. The Fund identifies and follows up overdue contributions in writing (letter and email), phone calls or may also visit sites to advise employers of arrears.

The Trustee of LUCRF Super is required to transfer your entire benefit to the ATO as unclaimed money in certain circumstances. This will occur within four months of the end of each half-calendar year if:

TRUSTEE RESERVE The difference between fees charged to members and the administration and investment expenses incurred in the management of the Fund are credited to the Trustee Reserve. This reserve is maintained to supplement funds required to meet future Trustee expenses. FUND ADMINISTRATION RESERVE The after-tax value of any insurance rebate received and tax benefits received in the payment of insurance premiums are both credited to this reserve. Earnings at the cash rate on reserve balances and on assets that support unpaid liabilities that cannot be directly referable to a member investment choice are also credited to this reserve. It is maintained to meet additional significant expenses of LUCRF Super and LUCRF Pensions. FUND OPERATIONAL RISK RESERVE This reserve is funded through rounding of the crediting rate process. It is maintained to meet unfunded liabilities as they arise during the administration and operation of the Fund.

Derivatives The Trustee has authorised the use of forward foreign exchange contracts to partially hedge the Fund’s international investments. Futures and options may also be used to manage the Fund’s investment portfolio. Derivatives are used to control risk and are not used to leverage the Fund or to speculate.

26

Indemnity insurance The Fund has taken out insurance to indemnify the Directors and legally responsible officers from loss resulting from any claim or wrongful act by the Trustee or any other party. The Directors are not indemnified against penalties of fine imposed by law as a result of negligence or dishonest conduct.

Transfer of benefits to an Eligible Rollover Fund (ERF) If no contributions have been received by LUCRF Super for over 12 months and a member account is below $500, the Trustee may elect to roll over the benefit to an ERF. An ERF is a fund that can receive benefits from other superannuation funds for members who cannot be contacted or who do not respond to letters regarding payment of their benefits. If a benefit is transferred to an ERF, any insurance cover will cease and all rights of membership of LUCRF Super cease.

•• You reach the eligibility age of 65 years, your account has been inactive for two years or more and we have not had contact with you for five years; or •• You have died and the Trustee is unable to locate a beneficiary in order to pay your benefit (after reason able endeavour); or •• You were in Australia as a temporary resident and you have not claimed your benefit after six months from your visa expiry or cancellation date; or* •• You are a lost member of the Fund (because two items of mail we sent to you have been retuned and undelivered) and: • The balance of your account is below $200, or • We have not received any contributions for you within five years and it will not be possible to pay a benefit to you in the future.

List of key LUCRF Super service providers (as at 30 June 2010) AUDITOR PricewaterhouseCoopers BANKERS Commonwealth Bank of Australia JP Morgan Chase Bank CUSTODIAN JP Morgan Chase Bank LEGAL ADVISORS DLA Phillips Fox Holding Redlich Ryan Carlisle Thomas Lawyers GROUP INSURER ING Life Limited TAX ADVISOR Ernst & Young

*The Trustee relies on ASIC class order relief to the effect that it is not obligated to issue an exit statement to departed former temporary residents when a benefit is transferred to the ATO, however the information can be obtained on request. You will need to contact the ATO directly to claim your benefit.

The ERF nominated by the Trustee is called Australia’s Unclaimed Super Fund (AUSfund). If you need to contact AUSfund, call 1300 361 798 or write to: AUSfund PO Box 2468 Kent Town SA 5071 Web: www.unclaimedsuper.com.au

27


table of contents / news / improving your super / investments / financial statements / contact

Statement of change in net assets as at 30 June 2010 $’000

2009/10

Australian Equities International Equities Derivatives Real Estate Investments

2009 $’000

$’000

$110,273

$669

$573

Change in Market Value

$94,278

($441,470)

Other Investment Income

$2,632

$174,959

$2,122

($319,360)

Employer Contributions

$234,630

$229,812

Member Contributions

$18,503

$17,503

Transfer from Other Funds and Co-Contributions

$75,997

$329,130

$83,449

$330,764

$1,073

$499

$10,327

$11,400

Opening net assets plus revenue

$6,867.20

$2,730,475

$7,366 $2,383,209

Less expenses and outgoings $267,720

$312,839

$64,635

$59,156

$822,834

$595,789

$1,095,569

$977,665

$9,113

$2,568

$230,208

$2,490,079

$221,387

Benefits paid and Payable Group Life Premiums Superannuation Surcharge Tax

$2,169,404

($126,422)

($129,567)

($12,998)

($12,435)

($4)

($5)

Administration Expenses

($13,849)

($18,387)

Direct Investment Expenses

($18,231)

Income Tax Expenses

($37,051)

($15,866) ($208,555)

Net assets available to pay benefits at end of year $3,733

$15,000

$15,000

$836

$987

Accrued Income

$7,292

$5,797

Outstanding (Sales) Settlements

$2,581

$1,610

Provision for Deferred Income Tax

$21,047

Sundry Receivable

$9,142

$63,546

Group Life Proceeds

$’000

$2,982

Contributions Receivable

$13,834

Dividend Income

Other Revenue

Other assets Cash at Bank

$2,364,439

Contribution revenue

Investments

Fixed Interest

$2,214,986

$’000

Other revenue

2010

Money Market Deposits and Other Investments

$’000

Interest Income Net Property Income

Statement of financial position as at 30 June

$’000

$’000

Net assets available to pay benefits at start of year

Financial statements

2009

Total assets

$49,738

$30,028

$2,539,817

$2,521,920

($168,223) $2,214,986

Reconciliation of interest paid to member accounts for the year ended 30 June

$57,155 $2,226,559

Investment Revenue

Less

Other Income

Income Tax Payable

($7,153)

$2,332

Benefits Payable

($1,516)

($6,577)

Tax Benefit on Administration & Investment Expenses

Outstanding (Purchases) Settlements

($4,989)

($1,815)

Sundry Payables

($4,239)

($5,513)

Net assets available to pay benefits

$8,037

Insurance Rebate Administration Fee Collected

($17,897)

($11,573)

$2,521,920

$2,214,986

2010

2009

2008

$’000

$’000

$’000

$174,959

($319,360)

($152,666)

$523

$0

$0

$6,479

$6,869

$17,381

$551

$500

$546

$11,797

$12,013

$11,286

$194,309

($299,978)

($123,453)

Outgoings

Represented by: Liability for Accrued Benefits

Administration Expenses

($13,849)

($18,387

($12,670)

Allocated to Members Accounts

Member Benefit Protection

($1,891)

($3,841)

($3,119)

Direct Investment Expenses

Investment Reserve Operational Risk Reserve Admin Guarantee Reserve (APRA) Expense Reserve

$2,503,744

$2,200,881

$0

$0

$1,396

$124

Tax Credit (Payable) out of Investment Income

$500

$500

Movement from (to) Reserves

$16,280

$2,521,920

$13,481

$2,214,986

Total paid as interest to members

($18,231)

($15,866)

($17,303)

($7,350)

$36,465

($4,112)

($4,071)

$1,133

($2,484)

$148,917

($300,474)

($163,141)

At the time of printing, the 2010 financial statements are unaudited. As the 2009 comparative figures are consistent with the 2009 Annual Report and audited financial statements, no restatement is necessary. If you wish to obtain a copy of the auditor's report and the full audited accounts, please contact us after 30 September 2010.

28

29


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Contact us

Our partners

Super Members Term Deposit

0.25

1300 130 780 Web: www.lucrf.com.au E-mail: mypartner@lucrf.com.au Post: PO Box 211 North Melbourne VIC 3051 Fax: (03) 9326 6907

up to

Queensland 17 Cribb Street Milton QLD 4064

Apply online at mebank.com.au or call 1300 309 374.

for LUCRF Super members

South Australia 46 Greenhill Road Wayville SA 5034

159233/0810

New South Wales Lvl 1, 1 Bridge Street Granville NSW 2142

p.a.

bonus interest

Office Locations (please use Postal Address for all correspondence) Head Office 833 Bourke Street Docklands VIC 3008

%

If you’re a member of LUCRF Super, our Super Members Term Deposit should give you plenty to smile about.

If you’re a member of a super fund The Super Members Term Deposit interest rates are up to 0.25% p.a. more than the interest rates for an ME Bank Standard Term Deposit. See mebank.com.au for eligible super funds and unions. Fees and charges may apply. Terms and Conditions available on request. This is general information only and you should consider if this product is appropriate for you. ME Bank is a trademark of Members Equity Bank Pty Ltd ABN 56 070 887 679.

is your bank

mebank.com.au

LUCRF Super would like to thank the Gibson family who gave up their time to be photographed.

30

31


32

33


Contact LUCRF Super

1300 130 780 Web: www.lucrf.com.au E-mail: mypartner@lucrf.com.au Post: PO Box 211 North Melbourne VIC 3051 Fax: (03) 9326 6907

This Annual Report dated September 2010 is issued by LUCRF Pty Ltd ABN 18 005 502 090 AFSL 258481 RSE Licence L0002981 as Trustee for the Labour Union Co-operative Retirement Fund (LUCRF Super) ABN 26 382 680 883 RSE Reg. R1067521. The information contained in this report is general in nature only and should be read in conjunction with your Annual Statement. It does not take into account your financial situation, objectives or needs, so you should look at your own financial position and requirements before making a decision. Should you require advice that addresses your personal circumstances, it is recommended you contact a person who is authorised to provide personal financial product advice. For more information on LUCRF Super, call 1300 130 780 or access our website www.lucrf.com.au for a copy of our Member Guide (combined Product Disclosure Statement and Financial Services Guide), which should be considered before making a decision about the Fund.

00139-0810

An award-winning fund

2009/10 Annual Report  

2009/10 Annual Report