The Executive Superannuation Fund

Transcription

1 The Executive Superannuation Fund ANNUAL REPORT KPMG STAFF SUPERANNUATION PLAN FOR THE YEAR ENDING 30 JUNE 2012 Important Information The issuer and Trustee of The Executive Superannuation Fund (ABN: , RSE Registration No: R ) is The Trust Company (Superannuation) Limited, ABN: , RSE Licence No. L , Australian Financial Services Licence ( AFSL ) No: Address: PO Box 361, Collins Street West VIC Ph: (03) Fax: (03) The Administrator of The Executive Superannuation Fund is KPMG Superannuation Services Pty Limited, ABN: , AFSL No: , Address: PO Box H67, Australia Square NSW Ph: (02) Fax: (02) You should read this document in conjunction with your Annual Member Statement which shows your benefit entitlements in The Executive Superannuation Fund for the year ended 30 June 2012.

2 General Disclaimer This Annual Report is issued by The Trust Company (Superannuation) Limited ( the Trustee ) ABN , AFSL No , RSE Licence No. L as trustee of The Executive Superannuation Fund ( the Fund ) ABN , RSE Registration No: R This Annual Report contains information relevant to a segment of the Fund in which KPMG staff participate, referred to as the KPMG Staff Superannuation Plan (or KPMG Staff sub-plan ). Please note: the KPMG Staff sub-plan is not a formally declared sub-plan for disclosure purposes. The Trust Company (Superannuation) Limited, any underlying fund manager and any other service provider to the Fund do not guarantee the investment performance of any investment offered or the repayment of capital. Investment in the Fund is subject to investment risk, including loss of income and capital invested. In addition, The Trust Company (Superannuation) Limited accepts no responsibility in connection with any insured benefits made available to members by KPMG as employer (Please note: these benefits are not provided within the Fund). The information provided in this report is in accordance with the requirements of the Corporations Act (Cth) The report also contains information about changes to the Fund, as well as an update on legislative changes that may be relevant to your superannuation. Any information is of a general nature only and has been prepared without taking into account your investment objectives, financial situation and needs. Before making any investment decisions in relation to the Fund, you should consider the current Product Disclosure Statement, including Incorporated Information ( PDS ) for the KPMG Staff sub-plan (and any significant event notices provided to you in relation to your benefits in the KPMG Staff sub-plan) and obtain professional financial advice from a licensed or authorised financial adviser. The PDS relating to all of the Fund s sub-plans are available from the Fund website ( or by contacting the Fund Administrator (contact details on the back page). A separate PDS relating to the Fund s Pension division (Pension PDS) is also available. Whilst all due care has been taken in the preparation of this report, the Trustee reserves its right to correct any errors or omissions. The terms of your membership in the Fund are set out in the Fund s Trust Deed and any applicable insurance policy. Should there be any inconsistency between this report and the Fund s Trust Deed, the terms of the Fund s Trust Deed will prevail. Insurance benefits are subject to the terms and conditions of the applicable insurance policy. 2

3 Message from the Trustee The Trustee presents the Annual Report for the KPMG Staff sub-plan of the Fund for the year ended 30 June This Annual Report should be read in conjunction with your annual Member Statement (mailed directly to you), which shows your member entitlements in the KPMG Staff sub-plan as at 30 June Please take the time to read this report, and, if you have any queries or require further information, contact the Fund Administrator (contact details on the back page). If you would like to receive a copy of this report (and all future annual reports) by mail, contact the Fund Administrator. Key points Net earning rates*: Aggressive option Balanced option Conservative option Cash option Total contributions and transfers paid in -2.44% 1.05% 4.41% 4.04% $76,020,528 Total benefits paid out $40,083,501 Net Fund assets at 30 June 2012 $417,662,972 *The net earning rate for each investment option is based on the combined return of each of the fund managers used in each investment option. It reflects the earning rate applied in respect of each available investment option, less the deduction of all fees, costs and taxes deducted prior to the calculation of the earning rate. Fund membership The Fund s membership changed during the year as follows: Total members at 1 July ,477 New members 1,564 Members who left 1,002 Total members at 30 June ,039 Who runs the Fund? The Fund is set up as a trust and is governed by a legal document called a Trust Deed. The Trustee responsible for running the Fund in accordance with the Trust Deed, is The Trust Company (Superannuation) Limited ("the Trustee") (ABN , AFSL No , RSE Licence No. L ). Trustee indemnity insurance The Trustee has taken out trustee indemnity insurance to help protect the Trustee, its Directors and the Fund against certain liabilities, that is consistent with the size and nature of its business and industry standards. As with any insurance, the indemnity is subject to the terms and conditions of the relevant insurance policy. Approved Guarantee As a professional trustee, The Trustee satisfies its capital requirements under section 29 DA (3) of the Superannuation Industry (Supervision) Act through an Approved Guarantee in the sum of $5 million. A copy of the Approved Guarantee is available for review upon request to the Fund Administrator. Policy Committee A Policy Committee is a committee whose purpose is to facilitate communication between the members of the Fund and the Trustee. The Policy Committee performs functions such as reviewing the Fund s investments and member communications. In most instances, a Policy Committee of a superannuation fund is required to be made up of an equal number of employer ( Company ) and employee ( Member ) representatives. However, due to KPMG s need to demonstrate independence from the management of the Fund (KPMG is auditor to many of the providers of large managed funds, including some funds in which the Fund invests), the Fund has an exemption from the Australian Prudential Regulation Authority ("APRA") to allow the Policy Committee to consist solely of Member representatives. 3

4 The Member representatives of the Policy Committee over the year to 30 June 2012 were: QLD VIC/TAS SA/NT/WA NSW/ACT Lisa Hurwood Russell Schoenfisch Stephen Price Samuel Ung Service providers During the year to 30 June 2012, the Trustee was assisted in the management of the Fund by a number of appointed service providers, including: Administration/ General Consulting KPMG Superannuation Services Pty Limited (AFSL No: ) Asset Consultant Newport Investment Consulting Pty Ltd (AFSL ) Investment objectives and strategies Members of the KPMG Staff sub-plan have a choice of the following four investment options for the investment of their superannuation accounts within the Fund: The Aggressive option; The Balanced option; The Conservative option; and The Cash option. You can split the investment of your existing account balance in any proportion between the four investment options. You can also elect to direct your future contributions to any one of the four investment options. As such, you have the option of maintaining your account balance in your existing strategy, while being able to consider whether you would like to have your future contributions invested in the same option or an alternative strategy. Insurer OnePath Life Limited (AFSL No: ) Auditor UHY Haines Norton (AFSL No: ) Please note that if you do not select your preferred investment option, the default investment option (the Balanced option) applies. Underlying fund managers over the 2011/12 year Maple-Brown Abbott Massachusetts Financial Services (MFS) National Corporate Investment Services (MLC) BlackRock Investment Management SG Hiscock Financial Services Group Aberdeen Asset Management Ankura Capital Intrinsic Investment Management Hyperion Asset Management OnePath Investment Management Schroder Investment Management Australia BT Investment Management UBS Global Asset Management National Australia Bank Limited Australia and New Zealand Banking Group Bank of Queensland Bank of Western Australia The Trust Company Limited * Note: the underlying fund managers utilised by the Trustee for investment by the Fund may be changed from time to time at the absolute discretion of the Trustee. They are shown in this report to provide historical information about the investments of the Fund during the year. You have no ability to choose the underlying fund managers utilised by the Trustee. * The Trust Company Limited is the Trustee s parent company and is the issuer of the Trust Cash Management Account in which the Fund invests. Any arrangements between the Trustee and The Trust Company Limited are conducted on an arm s length and commercial basis. Full information on these investment options is available within the current PDS for the KPMG Staff Plan and the Member Investment Choice Brochure. These documents are available via access to the Fund s website ( or by contacting the Fund Administrator (contact details on the back page). You should consider the most up to date Member Investment Choice Brochure, PDS, Annual Report and any significant event notices provided to you for the KPMG Staff sub-plan when choosing an investment option. Switching investment options Members can switch investment options for their existing account balance and / or future contributions on a monthly basis provided their switching request is received by the relevant due date. Members can choose different investment options for their existing account balance and future contributions. Investment option switches are not effective until processed by the Fund Administrator. Contact the Fund Administrator to request an Investment Choice Form or other information regarding the investment options (contact details on the back page). An Investment Choice Form can also be downloaded from the Fund s website. 4

5 No switching fee is charged, but a buy / sell spread may be incurred. See the current PDS or contact the Fund Administrator for further information (contact details on the back page). The due dates for switching requests for the remainder of the 2012/13 financial year are outlined below: Due date of request Switch effective date 2012/13 21 September September October October November November December December January January February February March March April April May May June June 2013 Investment tables The tables on the following pages contain information regarding the objectives and strategies of the Fund s investment options, as well as the investment performance of the Fund s options for the year to 30 June Note: past performance is not a reliable indicator of future performance. The objectives of each option are not a promise or guarantee of any particular benefit or return. The objectives are used by the Trustee to measure the performance of the Fund s investments. Further information about investment performance is also provided with your Member Statement for the year to 30 June A superannuation fund s investment performance typically varies over time. Because superannuation is a long-term investment, longer term returns (such as 5 and 10 year figures) smooth out short-term results. Depending on the nature of each investment option (including its risk profile), an investment option may experience negative returns from time to time and it is generally not appropriate to assess the performance of an investment option by the return for a single year or other short term periods. 5

6 Aggressive option Suitability Objective Investment Strategy Risk level* The option intended to be suitable for members seeking long term returns with high levels of volatility To achieve investment returns (net of tax and investment fees) exceeding: - Consumer Price Index ( CPI ) + 4.5% p.a. over rolling 5 year periods; and - The return of the median superannuation fund high growth investment option, as surveyed by the SuperRatings 25 High Growth Index over rolling 5 year periods. To invest primarily in growth assets (shares and property) with minimal assets invested in defensive assets (fixed interest and cash investments). Potential long term return Likely variability of return Potential for negative returns High High 5 in 20 years on average Benchmark Actual as at 30 June 2012 Australian shares 57.0% Australian shares 56.4% International shares 32.6% International shares 30.7% Property 5.3% Property 4.5% Asset allocation Private equity 0.1% Australian fixed interest 2.2% Private equity 0.3% Australian fixed interest 1.2% Overseas fixed interest 1.3% Overseas fixed interest 0.6% Cash 1.5% Cash 6.3% Minimum suggested investment timeframe Members should be invested for the long term with a minimum time frame greater than 10 years. Net earning rate 2011/12 financial year** -2.44% Compound average return over 5 years Fund returns against objectives (net of tax and investment fees) Super Ratings 25 High Growth Index median return over 5 years CPI + 4.5% over 5 years -4.03% -3.37% 7.25% Historical net earning rates** 2010/ % 2008/ % 2009/ % 2007/ % * This provides a general indication of the level of risk associated with this investment option. For an assessment of risks taking into account your personal situation, we suggest you consult an appropriately qualified adviser. **The net earning rates shown above relate to the performance of the Fund s investment option less the deduction of all fees, costs and taxes deducted prior to the calculation of the earning rate. Past performance is not a reliable indicator of future performance. The fund managers utilised by the Fund may be changed at the absolute discretion of the Trustee. You have no ability to choose the underlying fund managers. 6

7 Balanced option Suitability Objective Investment strategy Risk level* This option is intended to be suitable for members seeking long term returns with moderate to high levels of volatility. To achieve investment returns (net of tax and investment fees) exceeding: - CPI + 3.0% p.a. over rolling 5 year periods; and - The return of the median superannuation fund growth investment option, as surveyed by the SuperRatings 50 Balanced Index over rolling 5 year periods. To invest primarily in growth assets (shares and property) with the remainder of assets invested in defensive assets (fixed interest and cash investments). Potential long term return Likely variability of return Potential for negative returns Medium - High Medium - High 3 in 20 years on average Benchmark Actual as at 30 June 2012 Australian shares 38.4% Australian shares 36.8% International shares 24.7% International shares 23.1% Asset allocation Property 6.8% Private equity 0.1% Property 4.4% Private equity 0.1% Australian fixed interest 16.8% Australian fixed interest 17.1% Overseas fixed interest 7.2% Overseas fixed interest 3.7% Cash 6.0% Cash 14.8% Minimum suggested investment timeframe Members should be invested for the long term with a minimum time frame between 5 and 10 years Net earning rate 2011/12 financial year** 1.05% Compound average return over 5 years Fund returns against objectives (net of tax and investment fees) Super Ratings 50 Balanced Index median return over 5 years CPI + 3% over 5 years -0.46% -0.20% 5.75% Historical net earning rates** 2010/ % 2008/ % 2009/ % 2007/ % * This provides a general indication of the level of risk associated with this investment option. For an assessment of risks taking into account your personal situation, we suggest you consult an appropriately qualified adviser. **The net earning rates shown above relate to the performance of the Fund s investment option less the deduction of all fees, costs and taxes deducted prior to the calculation of the earning rate Past performance is not a reliable indicator of future performance. The fund managers utilised by the Fund may be changed at the absolute discretion of the Trustee. You have no ability to choose the underlying fund managers. 7

8 Conservative option Suitability Objective Investment strategy Risk level* This option is intended to be suitable for members seeking stable investment returns with moderate to low levels of volatility. To achieve investment returns (net of tax and investment fees) exceeding: - CPI + 2.0% p.a. over rolling 5 year periods; and - The return of the median superannuation fund conservative investment option, as surveyed by the Super Ratings 50 Capital Stable Index over rolling 5 year periods. To invest primarily in defensive assets (fixed interest and cash investments) with the remainder of assets invested in growth assets (shares and property). Potential long term return Likely variability of return Potential for negative returns Medium Medium 2 in 20 years on average Benchmark Actual as at 30 June 2012 Australian shares 15.8% Australian shares 11.2% International shares 9.1% International shares 7.3% Asset allocation Property 5.1% Australian fixed interest 30.5% Property 2.5% Australian fixed interest 28.6% Overseas fixed interest 11.5% Overseas fixed interest 5.1% Cash 28.0% Cash 45.3% Minimum suggested investment timeframe Net earning rate 2011/12 financial year** Historical net earning rates** Members should be invested for the medium term with a minimum time frame between 3 and 5 years. 4.41% Fund returns against objectives (net of tax and of investment fees) Super Ratings Capital Stable Index Compound average return over 5 years CPI + 2.0% over 5 years return over 5 years 2.29% 3.03% 4.75% 2010/ % 2008/ % 2009/ % 2007/ % * This provides a general indication of the level of risk associated with this investment option. For an assessment of risks taking into account your personal situation, we suggest you consult an appropriately qualified adviser. **The net earning rates shown above relate to the performance of the Fund s investment option less the deduction of all fees, costs and taxes deducted prior to the calculation of the earning rate Past performance is not a reliable indicator of future performance. The fund managers utilised by the Fund may be changed at the absolute discretion of the Trustee. You have no ability to choose the underlying fund managers. 8

9 Cash option Suitability This option is intended to be suitable for members seeking stable returns and minimal risk of a negative return. To achieve investment returns (gross of tax but net of investment fees) meeting or exceeding: Objective Investment strategy Risk level* - The return of the Consumer Price Index (CPI) over rolling 5 year periods; and - The return of the median superannuation fund cash investment option, as surveyed by the Super Ratings 50 Cash Index over rolling 5 year periods. To invest in defensive assets (fixed assets and cash investments). Potential long term return Likely variability of return Potential for negative returns Low Low Rarely if ever Benchmark Actual as at 30 June 2012 Asset allocation Cash Cash Minimum suggested investment timeframe Members should be invested for the short term with a minimum time frame between 1 and 3 years. Fund returns against objectives (net of tax and investment fees)*** Net earning rate 2011/12 financial year** 4.04% Compound average return over 3 years Super Ratings 50 Cash Index return over 3 years Consumer Price Index over 3 years 4.08% 3.94% 4.30% Historical net earning rates** 2010/ % 2008/ % 2009/ % 2007/08**** 4.09% * This provides a general indication of the level of risk associated with this investment option. For an assessment of risks taking into account your personal situation, we suggest you consult an appropriately qualified adviser. **The net earning rates of the investment option shown above relate to the performance of the Fund s investment option less the deduction of all fees, costs and taxes deducted prior to the calculation of the earning rate *** The compound average return of the Cash Option, the Consumer Price Index and the SuperRatings 50 Cash Index return are provided for reference purposes for the three-year period to 30 June The actual measurement of the Cash Option against its investment objectives is not possible, as the Cash Option has not been active for five years. ****The return for the financial year ending 30 June 2008 is measured from 27 July 2007, being the date that the Cash Option was introduced into the Fund. Past performance is not a reliable indicator of future performance. The fund managers utilised by the Fund may be changed at the absolute discretion of the Trustee. You have no ability to choose the underlying fund managers. 9

10 Allocation to fund managers The table below provides information regarding the Fund s holding in each of the fund managers as at 30 June 2012: Fund manager Asset class Holding as at 30 June 2012 ($) Percentage of the Fund s total holdings as at 30 June 2012 Aberdeen International Equity Fund International shares 28,552, % Bank of Queensland Term Deposit Fixed Interest 10,092, % Bankwest Term Deposit Fixed Interest 18,077, % BlackRock Wholesale Indexed Australian Equity Fund Australian shares 41,915, % BT Wholesale Core Australian Share Fund Australian shares 36,103, % Hyperion Australian Growth Companies Fund Intrinsic Investment Management Style Neutral P Fund Massachusetts Financial Services Global Equity Trust Massachusetts Financial Services Global Equity Trust (Hedged) Australian shares 11,373, % Australian shares 31,438, % International shares 23,607, % International shares 22,473, % MLC Assertive Option (KA) Multi-manager 2,196, % MLC Moderate Option (KB) Multi-manager 3,463, % MLC (NCIT) Moderate Trust Multi-manager 58,637, % National Australia Bank Term Deposit Fixed Interest 6,160, % OnePath Annuity and Pension Growth Fund Pooled Trust 338, % Schroder Australian Equity Fund Australian Shares 14,954, % Schroder Fixed Income Fund Standard Class Fixed Interest 63,138, % SG Hiscock Wholesale Property Fund Property 15,181, % Trust Cash Management Fund Cash 12,176, % UBS Cash Fund Cash 11,678, % Asset allocations as at 30 June 2011 For comparative purposes, the actual asset allocations in respect of the Fund s investment options as at 30 June 2011 were as follows: Aggressive option Balanced option Conservative option Cash option Australian Shares: 57.1% Australian Shares: 39.5% Australian Shares: 12.0% Cash: 100% Overseas Shares: 32.2% Overseas Shares 23.2% Overseas Shares 7.5% Property: 4.2% Property: 4.5% Property: 3.0% Australian Fixed Interest: 2.6% Australian Fixed Interest: 18.3% Australian Fixed Interest: 33.7% Overseas Fixed Interest: 0.8% Overseas Fixed Interest: 4.2% Overseas Fixed Interest: 6.1% Cash: 3.1% Cash: 10.3% Cash: 37.7% 10

11 Investment changes over 2011/12 During the year, the fund managers utilised by the Fund remained reasonably stable, with two changes occurring in respect of the Fund's investment portfolios over the 2011/12 financial year. On 1 March 2012, the mandate for the Ankura Australian Equity Trust was transferred to Intrinsic Investment Management Pty Ltd and the Fund invested in the Intrinsic Investment Management Style Neutral P Fund. In April 2012, the Asset Consultant recommended that the Fund s investment in the Maple Brown Abbott Australian Equity Trust be redeemed and the proceeds invested into the Schroder Australian Equity Fund. This recommendation was made due to the poor long term performance of the manager. In addition, during April 2012, Challenger began operating its funds under a new brand, Fidante Partners. As a result, the Challenger Wholesale Property Fund was renamed the SG Hiscock Wholesale Property Fund. During the 2011/12 financial year the Fund has also invested in term deposits with the Bank of Queensland, the Bank of Western Australia and ANZ Banking Group. Please refer to the Member Investment Choice brochure or the most current PDS for the KPMG Staff sub-plan for further information about the Fund s investment options (available by contacting the Fund Administrator see contact details on back page). Allocation of earnings to members The Trustee has adopted a policy of fully allocating the Fund earnings to members accounts based on the investment performance of the investment option(s) in which a member participates. As such, it does not hold any investment fluctuation reserves. The net earning rate of your chosen investment option(s) are based on the investment option s actual earning rate, i.e. the return of the underlying investments, less relevant taxes, fees and costs which are deducted from the assets held in the investment option, and are equal to the net investment return. The net earning rate of each of the Fund s investment options is subject to normal investment market movements and future investment performance cannot be guaranteed. As a result, the crediting rate, or any interim crediting rate, of any investment option may be positive or negative. The net earning rate is usually declared monthly (or on an interim basis for members who leave before the monthly rate is declared). Five year compound average net earning rates Over the five years to 30 June 2012, the compound average net earning rates for the Fund s investment options (other than the Cash Option) and over three years to 30 June 2012 for the Cash Option are as follows: Compound 5 year investment return Aggressive option Balanced option Conservative option Cash option* -4.03% p.a % p.a. 2.29% p.a. 4.08% p.a.* * Please note that the inception date for the Cash option is 27 July 2007, hence a five year compound average is not available. Past performance is not a reliable indication of future performance. Depending on when you leave the Fund, withdraw monies from the Fund or transfer to another category of membership or sub-plan (for example, you transfer to a Pension account) or make an investment choice, you may get back less than the amount of contributions paid into the Fund as a consequence of the level of investment returns earned by the investment option in which your account is invested and the deduction of taxation, fees and costs. The Trustee does not guarantee that you will earn any specific rate of return on your investment or that your investment will gain or retain its value. Earnings are allocated on a pro-rata daily basis and are compounded annually, each 30 June, when you elect to change investment options or close your account, based on monthly earning or crediting rates declared by the Trustee. 11

12 Investment returns over the year to 30 June 2012 General market overview Global markets were characterised by high levels of volatility over the 12 months to 30 June 2012, driven by developments in the Eurozone Debt Crisis and global growth concerns (particularly for the United States and China). Riskier assets such as equities suffered over this period as investors flocked to those assets perceived to be safer havens, such as fixed income. Global and Australian equities suffered during the second half of 2011 as Standard & Poor s downgraded the US s credit rating and China s GDP growth showed signs of slowing. Although markets recovered towards the end of the year and during the first part of 2012 when investors exhibited new optimism, the ground was lost again when talk of a Greek exit from the Eurozone dominated news. Hedged international shares ended the year to 30 June 2012 down by 4.2% and Australian shares ended the year 6.7% lower. Fixed income had a better year than equities due to the perceived safety of bond assets and despite growing concerns over the safety of government bonds, international government bonds delivered a return of 11.7% over the year. Australian bonds, including credit, delivered a strong return of 12.4% over the year. Australian Property had a strong 12 months to 30 June 2012, with listed property delivering a positive return of 11.0% and unlisted property delivering a return of 9.0%. It is important to note that the sector returns outlined above provide an indication of the performance of each asset class only and do not include deductions for tax or fees. Accordingly, a direct comparison of the Fund s performance against these sector returns is not possible. Rather, any comparison of the Fund s investment performance should be considered over the long term against an appropriate benchmark (see below). This is general information only about the performance of investment markets in the last financial year and does not constitute financial advice. Investment option performance against shortterm benchmarks An outline of the specific investment performance of the investment options relative to the investment objectives over the year to 30 June 2012 is set out below. The Aggressive option return (net of tax and fees) of -3.14% over the one-year period to 30 June 2012 slightly outperformed its objective of exceeding the median return of the SuperRatings 25 High Growth Index of -3.20% but underperformed its CPI objective of 5.75% over the one-year period to 30 June The Balanced Option return (net of tax and fees) of 0.47% over the one-year period to 30 June 2012 slightly underperformed its objective of exceeding the median return of the SuperRatings 50 Balanced Index of 0.50% and underperformed its CPI objective of 4.25% over the one-year period to 30 June The Conservative option return (net of tax and fees) of 3.75% over the one-year period to 30 June 2012 underperformed relative to its objective of exceeding the median return of the SuperRatings 50 Capital Stable Index of 4.12% but outperformed the CPI objective of 3.25% over the one-year period to 30 June The Cash option return (net of tax and fees) of 3.86% over the one-year period to 30 June 2012 underperformed the SuperRatings 50 Cash Index return of 4.04% over the same period, however, outperformed the CPI objective of 1.25% over the one-year period to 30 June The asset mix of the Fund s investment options reflects the Trustee s view of the appropriate mix of investment options to be offered to members, taking into account the demographic profile of the Fund membership. However, this does not mean that the Trustee has taken into account any member s individual circumstances. Please also refer to your Member Statement for the year ending 30 June 2012 for details of returns experienced by relevant options offered by the Fund for periods in excess of the five years provided above. Note: Past performance is not a reliable indicator of future performance. 12

13 Asset Consultant The Trustee utilises an asset consultant to provide advice regarding the investments of the Fund and the structure of the Fund s investment options offered to members. The asset consultant to the Fund over the 2011/12 year was Newport Investment Consulting Pty Limited (AFSL No: ). The investments of the Fund are continuously monitored via quarterly investment reports, which are reviewed by the Trustee and Policy Committee. These reports and the Fund s investments are discussed at quarterly Policy Committee meetings. Underlying fund managers may be appointed and removed by the Trustee upon the recommendation of the asset consultant. Any decision to appoint/remove a manager is based upon an assessment of the fund manager s style and performance, as well as its fit with the other managers utilised by the Fund. Derivatives The Trustee does not directly invest any of the assets of the Fund in derivative securities such as options, futures or swaps. The underlying fund managers utilised by the Fund may utilise derivatives to manage the risk and liquidity of their portfolios. They do not, as a general rule, invest in derivatives for speculative purposes. Insurance benefits The following information is a summary of the insurance benefits offered to eligible members of the KPMG Staff sub-plan of the Fund. Casual employees of KPMG are not provided with insurance in the Fund. It is important to note that temporary residents (e.g. secondees from overseas) are only eligible for insurance cover under the Fund s insurance policy while they are working in Australia. For more information on the insurance benefits available, members should refer to the current PDS for the KPMG Staff sub-plan or contact the Fund Administrator (contact details on the back page). Insurance benefits are subject to the terms and conditions of the Fund s insurance policies. Eligibility criteria and exclusions apply. The Trustee can only pay insurance benefits if a claim is accepted by the Fund s insurer and the Trust Deed and relevant law allows. Eligible members are automatically provided with the following types of insurance benefits (referred to as Standard cover): Death; and Total and Permanent Disablement ("TPD"). Members of the KPMG Staff sub-plan may be eligible for insurance cover within the Fund if they meet all of the following criteria: Are aged 69 or under for Death cover, or aged 64 or under for TPD cover; Are an Australian citizen, permanent resident or visa holder; Are employed on a permanent basis with KPMG Australia; Reside in Australia (unless they are working or travelling overseas and the Insurer has been notified of their travel, as outlined below); and Work in an occupation that the insurer does not class as an excluded occupation. Further information regarding the eligibility criteria applicable to the insurance cover provided is available from the Fund Administrator (contact details on the back page). Insured death benefits include a terminal illness benefit that may become payable in certain circumstances. Please refer to the current PDS for the KPMG Staff sub-plan for more details. KPMG staff employed on a permanent basis working 15 hours or more per week, also have access to Salary Continuance Insurance (or SCI ) through an insurance policy held by KPMG as the employer, outside the Fund. These insurance benefits are also summarised in this report for the convenience of members. Salary Continuance benefits are not payable from the Fund. The Death, TPD and SCI insurance benefits automatically provided to eligible members are summarised in the following table: Death and TPD insured benefit* All staff below Manager level (excluding casuals) Director / Manager (excluding casuals) 5 x remuneration to a maximum of $800,000* 7 x remuneration to a maximum of $800,000* * For members over age 60, the insured benefit payable on Total and Permanent Disablement reduces by 20% for each year by which your age exceeds

14 Salary Continuance Insurance benefit** Staff working 15 hours or more per week (excluding casuals) 75% of salary to a maximum of $15,000 per month ** Salary Continuance Insurance benefits are provided to KPMG staff through a policy held outside the Fund. Your current insured benefits within the Fund (if any) are outlined on your Member Statement. If you have insurance through the Fund, in the event of your death or total and permanent disablement, the total benefit payable is calculated as the sum of your account balance in the Fund plus the amount of your insured benefit. Premiums for standard cover For KPMG staff, concessional contributions are automatically made to the Fund by KPMG to cover the cost of the standard cover. The amount of the contribution will depend on your level of standard cover in the Fund. Additional voluntary insurance Eligible members (excluding casual employees and insurance only members) may apply for additional voluntary Death and TPD insurance cover above the Standard cover provided. This allows members who do not believe that the automatic levels of cover offered within the Fund are sufficient, to increase their insured benefits to a higher nominated amount. You may apply for any amount of additional Voluntary Death cover or Death and TPD cover, however: a total cap of $3 million applies in respect of TPD cover (including Standard cover); and The full amount of your additional Voluntary cover will have to be underwritten by the insurer. In order to obtain additional Voluntary cover, evidence of health (such as a health statement and blood test) will need to be provided to the insurer for underwriting to occur. Upon acceptance of the additional insurance amounts by the Fund s insurer, insurance premiums will be deducted from your benefit within the Fund to meet the cost of this additional insurance. Please refer to the current PDS for the KPMG Staff sub-plan for further details regarding the features, cost and process for applying for additional insurance cover. When cover commences Automatic insurance cover commences within the Fund effective the date you commence work with KPMG on a permanent basis (subject to meeting the eligibility criteria in the insurance policy). Additional voluntary insurance cover only commences upon acceptance of your application by the Fund s insurer. When cover ceases Death and TPD insurance cover generally ceases under the following conditions: When you reach age 70 (in the case of Death cover) or age 65 (in the case of TPD cover); When you become employed by KPMG on a casual basis; or When you terminate employment with KPMG and you advise the Trustee in writing that you no longer wish to be covered for Death and TPD insurance as a Personal Division member of the Fund; or When you terminate employment with KPMG and rollover all of your benefits to another superannuation fund; or When you die; or When you are disabled. If you are an insurance only member (i.e. you have elected to direct your superannuation contributions to an alternative fund), your insurance cover will cease at the time you leave employment with KPMG if you do not make a personal contribution to the Fund to meet the cost of insurance premiums. If you are a temporary resident, cover will cease on cessation of work with KPMG in Australia. Please refer to the current PDS for the KPMG Staff sub-plan for more information regarding the circumstances in which insurance cover may cease. A grace period may apply to your Death and TPD insurance benefits, which will continue for 30 days from the date of termination of your cover. Contact the Fund Administrator for further information (contact details on the back page). The Salary Continuance Insurance cover provided by KPMG outside the Fund generally ceases when you terminate employment with KPMG, unless you exercise a continuation option within 60 days of terminating employment (as outlined below). 14

15 Continuation of insurance upon termination of employment with KPMG When you terminate employment with KPMG, unless you rollover all of your benefit to another superannuation fund, you will be automatically transferred to the 'Personal Division of the Fund. You will receive notification from the Fund Administrator that this has occurred. The levels of Death and TPD insurance cover held at termination will automatically continue (provided insurance cover has not ceased for some other reason) subject to the deduction of insurance premiums from your account. Premiums for automatic cover will cease to be paid by KPMG. Your insurance premiums will depend on your level of cover (if any). For more information, refer to the Personal Division PDS. You will be able to cease this cover if you wish by notifying the Fund Administrator in writing by way of a signed letter confirming your instructions to cancel this cover. The Salary Continuance Insurance cover provided by KPMG outside the Fund may be continued upon application to the insurer within 60 days of you ceasing employment with KPMG. Please contact the Fund Administrator (contact details on the back page) for more information in relation to the continuation option. Any insurance that continues under the Fund s continuation option(s) is via a personal insurance policy issued by the insurer directly to a member (not through the Fund) and a member will be required to meet the cost of the relevant insurance premiums themselves. The cost of insurance cover under a continuation option may change. Fund insurer Insurance cover is subject to the terms and conditions of the insurance policy issued by the insurer, which is available on request from the Fund Administrator. The payment of any insured benefits by the Trustee from the Fund is subject to acceptance of a claim by the insurer, Trust Deed and superannuation legislation. More information on insurance Further details in relation to the insurance benefits and options offered are available within the Fund s current PDS for the KPMG Staff sub-plan, by contacting the Fund Administrator (contact details on the back page) or by visiting the Fund s website. Nomination of beneficiaries Your Member Statement shows your current nominated beneficiaries, whom you would prefer to receive your superannuation benefits upon your death. It is important that this information is up to date. You can make a change to your nominated beneficiaries at any time by contacting the Fund Administrator (contact details on the back page) and requesting a Nomination of Beneficiaries Information Guide or via your access to the Fund website. You can make two types of beneficiary nominations within the Fund for lump sum death benefits (including any insured benefit that may be payable). The two types of nominations are as follows: 1. Binding beneficiary nominations; and 2. Non-binding beneficiary nominations. These nominations apply to lump sum payments only and will apply to any benefits you accrue in any segment of the Fund until such time as the nomination expires, is revoked or replaced with another valid and effective nomination. A summary of each type of beneficiary nomination is outlined below. Please consider each type of nomination and, where appropriate, seek qualified estate planning, financial or taxation advice, prior to choosing the one which is right for you. Binding beneficiary nominations You can elect to make a binding death benefit nomination, which means that upon your death, the Trustee is obliged to pay any remaining account balance to the person(s) you have nominated provided the nomination is valid and effective at the date of death. With a binding death benefit nomination, the nominated individuals must be either a dependant or your legal personal representative. A binding nomination cannot be made on your behalf under a Power of Attorney. To be accepted, your binding nomination must be witnessed by two individuals who are over the age of 18 (and not your nominated beneficiaries). A binding death benefit nomination remains valid for only three years, so you must re-nominate beneficiaries every three years if your nomination is to remain binding on the Trustee. 15

16 You can also amend or revoke your binding nomination at any time. Any amendment or revocation must also be in writing and signed before two witnesses (as described above). Where a binding nomination is no longer valid, it becomes a non-binding nomination, whereby the decision as to whom your death benefit is paid lies with the Trustee. If there is any other information you reasonably need to understand your right to make a Binding Nomination, please contact the Fund Administrator (contact details on the back page). Non-binding beneficiary nominations By utilising a non-binding beneficiary nomination, you may nominate a dependant and/or legal personal representative to receive your benefit within any segment of the Fund upon your death, however, the Trustee has the discretion to pay your benefit to whom it believes is the most appropriate recipient. Whilst full consideration is given to your wishes when utilising a non-binding beneficiary nomination, it is important to realise that, where you have dependants or a legal personal representative, the Trustee is required, under the Fund s Trust Deed, to pay the benefit to your dependants or legal personal representative (estate) in such proportions as the Trustee sees fit. General information about nominations Further details regarding the nature and requirements for each type of beneficiary nomination are provided on the Nomination of Beneficiaries Information Guide and in the current PDS for the KPMG Staff sub-plan, both of which are available on the Fund s website ( or from the Fund Administrator (contact details on the back page). Please consider each type of nomination and, where appropriate, seek qualified estate planning, financial or taxation advice, prior to choosing the one which is right for you. Contributing to the Fund Note: the information about contribution limits shown below is a summary only, based on available information as at the date of preparation of this annual report and is subject to change. Please refer to for further and updated information, or speak to a suitably qualified adviser (taking into account your personal situation). Concessional contributions Concessional contributions include any Superannuation Guarantee (SG) contributions made by KPMG as your employer on your behalf, any additional contributions your employer may make and contributions you choose to make from your pre-tax salary (salary sacrifice contributions). Contribution types Superannuation Guarantee contributions and contributions to meet insurance costs KPMG as your employer will contribute 9% (increasing to 12% in the future) of your ordinary time earnings to the Fund, up to the prescribed maximum outlined within SG legislation (the maximum contribution for the 2012/13 financial year is $16,470 per annum). These contributions are concessional contributions. KPMG will also contribute an amount to meet the cost of your insurance benefits. This amount is advised on your annual Member Statement. Under SG legislation, KPMG is required to pay your 9% (increasing to 12% in the future) SG contributions on a quarterly basis by certain prescribed dates as follows: Quarter July September October December January March April - June Salary sacrifice contributions Required payment date 28 October 28 January 28 April 28 July KPMG may agree with you to make additional voluntary superannuation contributions to the Fund on your behalf in lieu of pre-tax remuneration (called salary sacrifice contributions ). These contributions are concessional contributions. Please note that the ability to make salary sacrifice contributions may not be available to all KPMG staff members. Please contact the Fund Administrator for further information (contact details on the back page). Please also note that while salary sacrifice contributions may provide some tax advantages, they will count as income when assessing your eligibility for the Government co-contribution, tax deductibility of personal contributions, spouse contributions rebate and certain welfare benefits. 16

17 You should seek your own professional advice about making salary sacrifice contributions having regard to your personal circumstances. Limits on concessional contributions Concessional contributions (which include your SG, additional employer, salary sacrifice contributions and deductible self-employed contributions) are limited to $25,000 per individual for each financial year (subject to indexation). This limit applies across all superannuation funds to which concessional contributions are made. From 1 July 2012, the $25,000 limit applies regardless of age. Concessional contributions made up to the concessional contribution limit will ordinarily be subject to tax at the concessional rate of 15% deducted by the Fund. (Note: the Government has proposed an increase in the rate of tax for individuals earning over $300,000 per year. For further information go to the ATO website ( or consult a taxation adviser). Any concessional contributions made in excess of the concessional contribution limit will be subject to tax at the rate of 46.5%. The liability for the excess tax (that is, the tax in excess of the concessional rate which ordinarily applies) will be levied on you personally by the ATO, i.e. you will receive a notice from the ATO requesting payment of the excess tax. However, on receipt of the notice, you can nominate a superannuation fund to release monies to pay the liability. Any excess contributions you make above the limit will be counted towards your non-concessional contribution limit (see below). (Note: Excess concessional contributions up to a certain amount can be returned to a member in limited circumstances. For further information go to the ATO website or consult a taxation adviser). Amounts excluded from the concessional contributions cap Some amounts that can be contributed or transferred to superannuation do not count towards your concessional contribution cap, including: Rollovers (including those from an overseas superannuation/pension fund) subject to some special rules for any untaxed amounts; Government co-contributions; and Non-concessional contributions. Non-concessional contributions Non-concessional contributions are contributions you make to superannuation from your after-tax salary. You can make up to $150,000 of non-concessional contributions to superannuation each financial year. This limit will be maintained at six times the $25,000 (indexed) cap on concessional contributions (see above). If you are under the age of 65, you can average this limit over three years, i.e. you can make contributions of $450,000 in one year, provided you do not make any additional non-concessional contributions for the following two years. Contributions made up to the $150,000 (or $450,000) limit will not be taxed by the Fund. Any contributions in excess of the limit will be taxed at 46.5%. The liability for this tax will be levied on you personally by the ATO. You must then nominate a superannuation fund to release monies to pay the liability. Any excess contributions you make above the limit will remain in the Fund. Where you make a contribution in excess of the 3-year limit (if you are under age 65 on 1 July of the relevant financial year) or, otherwise, the 1-year limit, the amount in excess of the limit will be returned to you, as it cannot be accepted by the Fund. The amount returned may be adjusted for investment fluctuations and reasonable expenses. You can make non-concessional contributions to the Fund on a one off basis at any time, or on a regular basis. To do so, contact the Fund Administrator (contact details on the back page). The Fund does not monitor whether your nonconcessional contributions (over a year) will result in you exceeding your cap. It is your responsibility to monitor your ongoing contributions to the Fund for tax purposes. Other amounts measured against the nonconcessional contributions cap Other amounts that count towards your nonconcessional contributions cap include: Any excess concessional contributions you make; The non-taxable portion of any benefit transferred from an overseas superannuation/ pension fund; and Contributions made to your account by your spouse. 17

18 Amounts excluded from the non-concessional contributions cap Some amounts that can be contributed or transferred to superannuation are not counted towards your nonconcessional contribution cap. They include: Rollovers from within the superannuation system; The taxable portion of a benefit transferred from an overseas superannuation/pension fund. Note, the untaxed portion will count towards your nonconcessional limit; Government co-contributions; Proceeds from the sale of qualifying small business assets which have been held for 15 years or are subject to the CGT retirement exemption (subject to a lifetime limit of $1.255 million for the 2012/13 financial year); and Settlements for injuries resulting in permanent disablement made to the Fund within 90 days of receiving the payment. Impact of making contributions without a TFN You or KPMG will be unable to make any contributions to the Fund if we have not been provided with your TFN. The law does not allow us to accept or retain member contributions if we do not have your TFN, and the Trustee has decided that employer contributions will not be permitted if we do not hold your TFN to more effectively manage the Fund s tax liabilities. Any contributions that you or your employer attempt to make to the Fund will be returned to you within 30 days if you do not provide your TFN to the Fund, after taking into account any allowable adjustments for investment fluctuations and reasonable costs. Contributions for your spouse If your spouse is a member of the Personal Division of the Fund, you can make non-concessional contributions to the Fund on their behalf. A spouse contribution may attract a tax rebate of up to $540 per year for the contributing spouse depending on the receiving spouse s income (please refer to the current PDS or the ATO website at for more information). These contributions will count towards the recipient s non-concessional contribution limit. Contributions splitting You can request that up to 85% of your concessional (SG, employer and salary sacrifice) contributions made during a financial year are split with your spouse, including a de facto spouse. This is subject to a maximum of your concessional contributions limit. The Trustee may also make whatever adjustments to the splittable amount it considers necessary or appropriate (for example, to meet any tax liabilities relating to your benefits). Please refer to the current PDS or the ATO website at for more information about contribution splitting. Eligibility to contribute to superannuation Any person under age 65 may contribute to superannuation, regardless of whether or not they are employed. From the ages of 65 to 69, you must have worked at least 40 hours during a continuous 30-day period during the financial year ( work test ) in order to be able to make a contribution to superannuation. However, mandated employer contributions are not subject to the work test. You cannot make personal contributions to superannuation past the age of 74 (Contributions to your account by a person other than your employer cannot be made past the age of 70). Generally, from age 75 no contributions other than award or compulsory employer contributions can be made to superannuation. Contributions made to the Fund in contravention of these eligibility rules must be rejected or refunded by the Trustee in certain circumstances. A refund may be adjusted for any allowable investment fluctuations and reasonable costs. Government co-contributions Some members of the Fund may be eligible to receive the Government co-contribution. The Government co-contribution matches eligible personal non-concessional contributions made by qualifying low and middle income earners by $1.00 for each $1.00 you contribute, up to $1,000. The Government co-contribution is paid annually to qualifying low and middle income earners superannuation funds. 18

19 The maximum co-contribution for the 2011/12 financial year was $1,000 and is available to people earning an assessable income plus reportable fringe benefits plus reportable employer superannuation contributions of $31,920* or less in a financial year. The maximum co-contribution amount phases out by cents per dollar of income up to an income of $61,920*, when it phases out completely. The Government co-contribution (the amount contributed by the Government) does not count towards either your concessional or nonconcessional contribution caps. *These thresholds apply up to 30 June 2012 but are subject to change in future years. The Government has proposed changes to the co-contribution (refer to the Legislative Update appearing later in this report). For up to date information about the Government co-contribution from year to year, go to Reportable employer superannuation contributions ( RESC ) RESC s are generally concessional contributions made by an employee via a salary sacrifice arrangement and do not include contributions made to satisfy an employer s SG or award obligations. RESC s are treated as income for the purposes of various Government support payments. This includes support programs such as the Government cocontribution scheme; other superannuation related financial assistance delivered through the tax system (including spouse contribution rebates and tax deductible member contributions) and a range of welfare benefits. The inclusion of these amounts within the assessment of an individual s income is intended to limit individuals and their families accessing a range of government support payments than would be possible if their salary-sacrificed contributions were paid as salary or wage income. Members who currently make concessional contributions via a salary sacrifice arrangement to the Fund and envisage claiming a Government co-contribution may wish to review their circumstances before making the necessary contribution to superannuation in the coming year. Your spouse and immediate family can join the Fund Members spouses and immediate family members are able to join the Fund. Spouse members are also able to take out Death and TPD insurance through the Fund. For further information regarding spouse members, the insurance options available to spouse members, and the types of contributions accepted for spouse members, see the Personal Division PDS, available by contacting the Fund Administrator (contact details on the back page) or by visiting the Fund s website. The Personal Division PDS should be considered when making a decision about spouse and family membership in the Fund. A spouse may include (subject to the Trust Deed) a de facto spouse of the same or opposite sex. For further information, refer to the Personal Division PDS or contact the Fund Administrator. Superannuation surcharge tax Whilst the superannuation surcharge was abolished with effect from 1 July 2005, the ATO may still issue assessments in relation to previous years. Any assessments received in relation to individual members of the Fund will be reflected in their Surcharge Account and deducted from their benefit upon leaving the Fund. Please note all surcharge assessments are paid to the ATO within the necessary timeframe. Any amount deducted in relation to the superannuation surcharge tax during the year is shown on your member statement. Your Surcharge Account will continue to accrue with earnings until you leave the Fund. The earning rate applied to your Surcharge Account is the net earning rate of your investment option (refer to pages 6-9 of this Annual Report). UK pension transfers to the Fund The Fund is registered as a Qualifying Recognised Overseas Pension Scheme ( QROPS ). As such, members can elect to transfer any monies held in a UK pension fund into the Fund. If you are considering such a transfer, you should be aware that such a transfer is subject to complex rules (including guidance issued by the relevant UK authorities which may change from time to time) and may have significant tax implications depending on your personal circumstances. 19

20 As such, members should seek appropriate advice prior to considering overseas transfers. For more details about arranging a UK pension transfer to the Fund, please contact the Fund Administrator (contact details on the back page). Withdrawing benefits from superannuation The preserved component of your superannuation benefit must remain within the Australian superannuation system, generally until your permanent retirement from the workforce after you reach your preservation age. Your preservation age is determined in accordance with the following table: Date of birth Preservation age Before 1 July July June July June July June July June After 30 June From 1 July 1999, all superannuation contributions (including member contributions) and earnings are preserved. Any component of your benefit that was unrestricted non-preserved at 1 July 1999 will continue to be unrestricted non-preserved and can be taken in cash at any time. Any restricted non-preserved amount will remain restricted non-preserved until such time as you cease employment with KPMG or satisfy one of the conditions of release outlined below. Your ability to claim preserved benefits other than at retirement (as described above) is restricted, however, the law does allow for the release of benefits where you are an Australian citizen, New Zealand citizen or permanent resident* and otherwise satisfy a condition of release, including as follows: When you reach age 60 and cease an employment arrangement; When you reach age 65; When you die; When you suffer a terminal illness condition as defined in superannuation legislation (this condition of release is subject to the provisions of the Trust Deed); When you have ceased gainful employment with KPMG and your account balance is less than $200; If in the Trustee's opinion you are "permanently incapacitated" in accordance with superannuation legislation; If the Trustee approves the early release of preserved benefits on the grounds of severe financial hardship. Should you wish to apply for a benefit on these grounds, the application form is available by contacting the Fund Administrator (contact details on the back page); If the Department of Human Services ( DHS ) determines preserved benefits should be released on pre-defined specified compassionate grounds ( compassionate grounds ), such as to cover palliative care or funeral costs; and Where the law otherwise permits (for example, to satisfy an ATO Release Authority). The Trustee may also allow the payment of your benefit in the form of a Transition to Retirement Pension, once a member has reached their preservation age, but chooses to continue employment. A Transition to Retirement Pension product is available from the Fund s Pension Division. Refer to the Pension Division PDS for more information, which is available from the Fund website or by contacting the Fund Administrator (contact details on the back page). You should consider the Pension Division PDS whenever making any decisions whether to acquire or hold a pension product from the Fund. *Different rules apply to temporary residents. Some (but not all) of the conditions of release outlined above apply to temporary residents (e.g. death, permanent incapacity) and a former temporary resident may be able to access their superannuation benefits as a Departing Australia Superannuation Payment ( DASP ) on permanently departing Australia and expiry of their visa. More details are available by contacting the Fund Administrator (contact details on the back page). How long can you leave benefits in superannuation? You can leave your benefits in the superannuation system, and the Fund indefinitely. There is no requirement to withdraw benefits from superannuation once you reach a certain age or retire, however benefits must be paid (or commence to be paid) as soon as practicable after the death of a member of the Fund. 20