2011/12 annual report - lucrf super pty ltd

2012 Annual Report1

2012 ANNUAL REPORT

2012 Annual Report2

Table of contents

This Annual Report was issued August 2012 by LUCRF Pty Ltd ABN 18 005 502 090 AFSL 258481 RSE Licence No L0002981 as Trustee for the Labour Union Co-operative Retirement Fund (LUCRF Super) ABN 26 382 680 883 RSE Reg R1067521

50

100

150

200

250

300

350

400

450

1996 2000 2004 2008 2011

Asse

ts ($b) $75

BILLION

DIFFERENCEIndustry fund returns $442

Retail fund returns $367

4 Our Trustee Board

8 Our Members

14 Industry vs Retail

15 Awards

16 Investments 2011/12 summary

20 Investment Options

24 Performance Results

26 Financial Statements

2012 Annual Report3

It is our pleasure to present the 2012 Annual Report of the Fund. It has been another year of achievement. We have continued to provide a high quality service to our membership and produced a top quartile investment performance this financial year.

Whilst the past year has been a difficult one with investment markets remaining volatile in the wake of the Global Financial Crisis and the European debt situation, LUCRF’s performance of 1.18% was very competitive.

Ratings agencies placed us in the top quartile among the leading super funds. We finished 12th in the SuperRatings SR50 Balanced table.

LUCRF’s Balanced (default) option finished ahead of the Top 50 Funds Median return of 0.45%, also above the Not for Profit Funds Median of 0.69%, and well ahead of the Retail Funds Median of negative 0.33%.

LUCRF Pensions returned 1.62% (higher return as pensions are tax exempt), again ahead of the industry median of 1.18% and well ahead of the Retail Funds median of negative 0.14%.

This year’s results again confirm the superior performance of Industry Funds when compared to Retail Funds.

Over the longer term, our three year rolling average of 6.00% and 7.28% for pensions has provided real growth for members in difficult times.

The Fund continues to grow steadily, with Superannuation Guarantee contributions (paid by the employer on behalf of members) increasing by approximately 19% over the last two years. Pension accounts have also grown steadily, with accounts and Funds Under Management up by around 30% in the 2011/12 financial year.

This year our Business Development Managers, Contact Centre Consultants and our Financial Planners have spoken to many thousands of members both face-to-face and over the phone. We have assisted members with planning for their retirement, maximising their super opportunities, and importantly, finding their lost super and combining multiple super accounts.

In the coming year, LUCRF will continue to work hard to provide advice and education to its members, and deliver competitive investment returns.

LUCRF is gearing up for the introduction of the MySuper regulatory changes and are on track to meet all regulatory requirements at an early date.

Assistance from LUCRF is only a phone call away. Please do not hesitate to contact us if we can help.

Best regards

forewordChairman & CEO

Greg Sword AM CEO

John Carlile

Chairman

2012 Annual Report4

OurTrustee Board

Charlie Donnelly (Deputy Chairman) General Secretary National Union of Workers

John Carlile (Chairman) Consultant

Christopher Brown Consultant

Jeff Doyle CEO Adecco Group

Ted Eftimiadis Employee Relations Manager Pacific Brands

Gary Maas Assistant Victorian Branch Secretary National Union of Workers

Tim Kennedy Victorian Branch Secretary National Union of Workers

Tony O’Grady Consultant

Employer Representative Directors Member Representative Directors

Heather MilesGeneral Manager, Corporate ServicesGrainCorp Limited(Appointed 29th June 2012)

Raymond Tanner Consultant (resigned 27th June 2012). We would like to thank Ray for his contribution.

Independent Directors

Paul Richardson Assistant National Secretary National Union of Workers

Caterina Cinanni Lead Organiser National Union of Workers

David O’Sullivan Partner IFS Legal

2012 Annual Report5

Appointment to the BoardThe Fund’s Trust Deed and Rules sets out the procedure for appointing Directors. The General Secretary of the National Union of Workers nominates Member Representatives in writing.

Employer Representatives and Independent Directors are appointed on the recommendations of nominating committees.

Trust DeedA copy of our Trust Deed and Rules is available by calling us on 1300 130 780 or sending an email request to [email protected]

Changes to the Trust DeedThe way in which the Fund is governed and controlled is established through a legal document – the Trust Deed and Rules.

No changes were made to this during the year.

2012 Annual Report6

Directors Board Meetings Investment Committee

Compliance & Audit Committee

Management Committee

Membership Services

Committee

John Carlile 6/6 11/11 6/6 11/11 5/6

Charlie Donnelly 5/6 10/11 6/6 – –

Paul Richardson 6/6 – – 9/11 –

Tim Kennedy 6/6 9/11 6/6 – –

Gary Maas 6/6 – – 11/11 –

Caterina Cinanni 5/6 – – – 4/5

Jeff Doyle 5/6 – – – 5/5

Ted Eftimiadis 6/6 – 5/6 – –

Raymond Tanner 6/6 9/11 – – 5/5

Christopher Brown 5/6 – – – 4/5

Tony O’Grady 5/6 10/11 – – –

David O’Sullivan 6/6 – – 10/11 –

Directors’ Attendance at Board and Committee MeetingsFor year ended 30 June 2012

CommitteesThe Trustee Board has appointed five Committees that advise it. Members of each Board Committee at the time of publication are detailed below:

Compliance & Audit CommitteeJohn Carlile, Ted Eftimiadis, Tim Kennedy* and Charlie Donnelly.

Membership Services CommitteeChristopher Brown, Caterina Cinanni, Jeff Doyle* and Heather Miles.

Investment CommitteeCharlie Donnelly, Tony O’Grady*, Tim Kennedy and John Carlile.

Management CommitteeJohn Carlile, Gary Maas*, David O’Sullivan and Paul Richardson.

Remuneration Committee (commenced 1 July 2012)

John Carlile, Charlie Donnelly and David O’Sullivan.*Chairman

2012 Annual Report7

RemunerationLUCRF is run only to benefit members and this is reflected in the remuneration policy. It is also committed in attracting, and retaining talented staff who are capable of providing the highest standard of services to our members.

LUCRF Executive Team Remuneration

Remuneration Band For year ended 30 June 2012$50,000 – $99,999 0

$100,000 – $149,999 3

$150,000 – $199,999 7

$200,000 – $249,999 1

$250,000 – $299,999 0

$300,000 – $349,999 1

Total 12

Executives & Directors 24

DirectorsLUCRF Directors are paid a fee for the work they do as directors. It recognises the time, experience and responsibility required from them. Director remuneration consists of a fixed annual fee, committee fees, training attendance fees and Superannuation Guarantee (SG) contributions.

The Member Representative Directors nominated by the union do not receive payment, however, Superannuation Guarantee contributions are made into their nominated super fund account in accordance with SG regulations. Payment is made to the sponsoring union to compensate it for the time Directors spend away from their employment.

Executive TeamRemuneration benchmarking was obtained to compare LUCRF remuneration levels with the practices of relevant markets. There is no performance related component.

The remuneration of the Executive Team, including the Chief Executive Officer was approved by the Board via the Management Committee.

StaffStaff remuneration is based on a collective agreement negotiated with staff and the appropriate union. The agreement specifies the annual salary increments received by staff.

Remuneration Band For year ended 30 June 2012$40,000 – $49,999 1

$50,000 – $59,999 7

$60,000 – $69,999 2

$70,000 – $79,999 0

$80,000 – $89,999 2

Total 12

LUCRF Director Remuneration

2012 Annual Report9

LUCRF member Daniel Naismith can attest to this. As a proud father of two boys - six and four - life in the Naismith home is never dull! But Daniel wouldn’t want it any other way.

“They are my greatest achievement to date,” Daniel says of his family.

On the weekends there’s nothing Daniel likes more than to take his four wheel drive out to the state forests of Victoria, around Bunyip and Murrindindi. He loves getting out into the fresh air and exploring all that the country has to offer.

For Daniel, having a successful career is just as important as creating a good home environment for his family.

A Production Line Operator at one of the country’s largest pharmaceutical companies, Aspen Australia, Daniel says it’s the problem solving side of his role that he loves most.

Aspen Australia produces a broad range of pharmaceuticals for brand names like Herron and Chemist’s Own.

Daniel has been with Aspen for more than two years and his role involves setting up the production and packaging machines, and ensuring they’re all running smoothly. The production plant at Dandenong in Victoria runs 24 hours a day. When we visited, Daniel was producing and packaging paracetamol tablets.

“I enjoy setting up the line, problem solving and helping others out. I’m pretty mechanically minded,”said Daniel.

When it comes to super, Daniel says he’s stayed with LUCRF over the years because it’s the philosophy of the Fund that he admires most.

It’s that same philosophy that Daniel lives by that has helped him make a success of his life.

While retirement is still a long way off for Daniel, his aim is to move to the country with his family one day and run a farm. “I’d love to buy a piece of land and get right into hobby farming,” Daniel said.

When it comes to creating a fulfilling life, a successful balance of family and career is important.

LUCRF Super cares about making a real difference to people’s lives.

2012 Annual Report11

A long-time LUCRF Super member, Anna enjoys being outdoors and spends most weekends in her beautiful garden at the foothills of the mountains.

An avid lover of all creatures great and small, Anna says her pets – a couple of spoiled cats (one who is 19 years old) and a friendly Belgium Shepherd dog – are great company.

Anna also enjoys spending time with her granddaughter, who she says brings her much happiness.

Whether it’s in the office, or at home in the garden, put simply, Anna loves to work. While retirement is not something that’s front of mind for her right now, Anna has taken steps to plan for her future.

A super and pension member, Anna says she enjoys the benefits a transition to retirement pension arrangement gives her.

Anna identifies working hard as the key to her success. A loyal member of the team at Corex Plastics, Anna likes to be busy and says that every day at Corex is different.

“I love my job. I take on a lot, but I enjoy the challenge,” said Anna.

Anna has been with the company for 23 years and back then there were just 16 employees. Corex now employs more than 160 staff. “It’s a family business and the people are great,” said Anna.

A woman who thrives on hard work; Anna went back to study at night school to gain her accounting accreditation and it’s allowed her to progress through the company over the years.

“It was really hard work, but it’s something I’m very proud of,” said Anna.

Anna has been a LUCRF Super member for more than 21 years and says she wouldn’t change a thing.

“I wouldn’t think of any other super fund. LUCRF’s history of strong returns and low fees mean my super is working hard,” said Anna.

Keen gardener, animal lover and accountant – Anna Farrell says working hard and enjoying life is the key to her success.

I’m saving on tax and at the same time growing my super, while I’m still working.


Tom Ota has been a member of LUCRF Super for nearly 28 years, almost since the time of the Fund’s inception.

Having entered retirement two years ago, Tom is enjoying the freedom his super gives him. He loves nothing more than pottering around the house, but it’s in the garden where his real passion lies.

For Tom and his wife, their home is a beautiful terrace house in the inner city, and it is there that he is engrossed in what he is growing in their garden.

Tom’s wife still goes out to work and Tom says that he too “wouldn’t mind picking up some part-time work to keep busy.”

For Tom, it’s his children that make him most proud and who he describes as his highest achievement in life. “My greatest success is having a happy family,” said Tom.

He says it’s heartening to know everything has turned out okay for his two grown up children.

My retirement is going well, thanks to LUCRF.

For this LUCRF Pension member, a successful retirement means having the freedom to choose his own path.


Industry super

retail fundsA new research paper comparing long-term superannuation performance among industry and retail super funds, provides food for thought when it comes to choosing a super fund, like LUCRF Super.

50

100

150

200

250

300

350

400

450

1996 2000 2004 2008 2011

Asse

ts (

$b) $75

BILLION

DIFFERENCEIndustry fund returns $442

Retail fund returns $367

funds outperform

The research paper, “A comparison of long term superannuation investment performance – Update 2012” looks at the performance of industry and retail super funds over the past 15 years.

Produced by the Industry Super Network (ISN), the paper shows that on average, retail super funds have underperformed not-for-profit funds (public sector, corporate and industry funds) by more than 2% p.a. over the past 15 years (1996–2011).

Average retail super fund returns were also lower, returning 3.84% per annum after tax and costs, and fell short of annual term deposits over the same period. LUCRF Super’s Balanced (default) option, meanwhile, returned an average 6.90% p.a. over the 1996-2011 period.

The retail super sector is the largest segment of APRA-regulated superannuation funds, with $367 billion or 45% of assets under management (as at June 2011).

Therefore, each year of underperformance by retail super funds costs Australians billions of dollars. The research found that over the fifteen year period, if retail super funds had earned industry super fund returns, Australian retirement savings would currently be $75 billion higher.

While all super funds have been affected by market volatility in recent years, industry super fund investments have been more stable than local and foreign equity markets, due to their broad diversification, particularly with investments in asset classes such as unlisted property and infrastructure.

On average, industry super fund performance has been superior to that of retail super funds throughout the period before, during and after the Global Financial Crisis.

Past investment performance is not a reliable indicator of future investment returns. Source: A comparison of long term superannuation investment performance – Update 2012.


awards

AAA rating LUCRF Super has again received a 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 LUCRF Super is a high-quality fund that is well managed, competitively priced and has a strong track record of demonstrated success, with a range of useful features that is likely to appeal to its membership.

Platinum rating LUCRF Super has been awarded a Platinum rating – the highest possible, for both our pension and super products, by SuperRatings, an independent ratings agency that assesses over 500 of Australia’s largest multi-employer super funds, personal super and pension funds. The prestigious platinum award is only given to funds that represent the ‘best value for money’. The criteria that help form the ratings include investments, fees and charges, administration, advice, governance, insurance and qualitative overlay.

5 Star rating LUCRF Pensions have been awarded five stars from one of Australia and New Zealand’s most comprehensive research service providers, CANSTAR.

The five star status, which is the top rating denotes outstanding value and was awarded based on factors such as; cost, management fees, transaction fees, member benefits, accessibility, functionality, insurance cover, income payment options and retirement solutions. This award recognises our commitment to deliver high quality pension products and services to members.

LUCRF Super is an award-winning Fund recognised for excellence in products and services by several independent ratings agencies. Our awards include:

Our


Australia:Despite global economic growth concerns, Australian economic indicators for the year to 30 June 2012 were positive as the Australian economy continued to grow with gross domestic product (GDP) increasing by 3.6%1 for the year to March 2012 and unemployment levels remaining low at 5.1%2 in May 2012, up 0.1% from the same period last year. Inflation, as measured by the change in the Consumer Price Index (CPI) was low at 1.6%3 for the year to March 2012, comfortably below with the 2.9%4 rise in CPI for the 12 months to March 2011.

Overall the Australian share market (as measured by the S&P/ASX 200 Accumulation Index) suffered its worst loss since the 2008/09 financial year, underperforming both Wall Street and London’s FTSE 100 equities index with a return of -7.0%5. Volatility was elevated during the past 12 months, with significant swings in return occurring over short time periods as markets reacted to negative macroeconomic developments both locally and overseas. Key contributors to this negative performance were the still high Australian dollar (despite a decline over the year versus most major developed currencies except the Euro), a weak retail sector and a fall in commodity prices due to concerns of slowing demand in China.

The best performing Australian equity sector for the year was the Telecom sector, returning 38.3% over the year, while the worst performing sector was Materials, which fell 28.1% over the year6.

Australian unlisted property performed strongly throughout the financial year, as investors gravitated towards quality yield-generating assets. Despite the weak economic environment, especially within the Retail sector, vacancy rates remained relatively low with rental income providing the majority of performance. The Australian listed property market, as measured by the S&P/ASX300 Property Accumulation Index, returned 11.0% for the year, compared to the last financial year when the Index returned 5.9%. The Australian unlisted property market, as measured by the Mercer/IPD Australian Property Pooled Fund Index, returned 9.5% for the financial year.

Investments2011/12 Annual Economic & Market SummaryPrepared by


Global:Significant volatility was once again prevalent in global financial markets for the 2011/2012 financial year, with concerns surrounding a hard-landing in China, sovereign debt issues in the Eurozone and the fragility of the US economic recovery driving this situation. Concerns surrounding the level of sovereign debt in Greece, Portugal, Italy and Spain (the Eurozone’s fourth largest economy) also continued to intensify. Fears of a double-dip recession in the United States re-emerged early in the financial year due to political brinkmanship around reduction of sovereign debt and Standard & Poor’s downgraded its credit rating of the US from AAA to AA+. However, since the downgrade, US economic data has been mildly positive, on the back of the Federal Reserve’s policy of retaining near zero cash rates plus a variety of fiscal stimulus measures put in place.

Against this backdrop, global share markets performed poorly for the year, finishing the year behind by -2.1%7 in local currency terms, as measured by the MSCI World ex Australia Index. When measured in unhedged Australian dollar terms, this return was -0.5%8, reflecting the weakening of the Australian dollar over the past 12 months.

Global Real Estate Investment Trusts (REITs) flourished in the year’s global macroeconomic environment of low growth and low interest rates, returning 6.1% (in unhedged $A) as measured by Global REIT indices. With bond yields falling to record lows, investors were searching for yield and quality so interest in this asset class remained high.

Cash and Fixed Interest:Australian bonds performed very strongly for the year to 30 June 2012, returning 12.4%9 for the year as measured by the UBSA Composite (All maturities) Bond Index, as investors sought the relative safety offered by investment grade and particularly Government bonds. The Australian 90 Day Bank Bill Index returned 4.7% for the year, while the UBSA Composite Bond Index (All Maturities) returned 12.4% for the year. Global fixed interest, as measured by the Barclays Global Aggregate Index (hedged to A$) returned 11.6%, underperforming the Australian fixed interest market. Official cash rates were reduced four times throughout the year by the Reserve Bank of Australia from 4.75% to 3.5%. This reflected the weaker than expected global economic conditions as well as a moderation in domestic inflation pressures throughout the later parts of the financial year.

Note: This investment commentary does not constitute advice. All investment figures quoted relate to before-tax performance of the relevant industry benchmark.

1Source: Australian Bureau of Statistics 2Source: Australian Bureau of Statistics 3Source: Australian Bureau of Statistics 4Source: Australian Bureau of Statistics 5Source: Datastream 6Source: Standard&Poors 7Source: Datastream 8Source: Datastream 9Source: Datastream


Annual investment returns

Updating your balanceAt the end of each financial year, we calculate our declared rates which represent the final return on investments for our members. This percentage is then applied to your account accordingly.

Once finalised, we send you a statement outlining how your account has performed over the course of the year.

DerivativesThe 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.

InvestmentsAt 30 June 2012, the following investments exceeded 5% of the Fund’s total assets:

Karara Capital Limited...................................10.22%

ME Bank.........................................................7.64%

DFA Australia (Dimensional).............................6.97%

Colonial First State Asset Management (Australia) Ltd.....6.75%

Bridgewater Associates Inc..............................5.12%

List of key LUCRF Super service providers (as at 30 June 2012)

AuditorPricewaterhouseCoopers

BankersCommonwealth Bank of Australia JP Morgan Chase Bank

CustodianJP Morgan Chase Bank

Legal AdvisersDLA Phillips Fox Holding Redlich Maddocks Ryan Carlisle Thomas Lawyers

Group InsurerOne Path

Tax AdviserErnst & Young

Investments


Investment optionsWe offered nine investment options for members to choose from during the 2011/12 financial year.

These are classified as either Pre-mixed or Asset Class options.

Pre-mixed optionsOur Pre-mixed options are made up of a blend of asset classes and are known as diversified. Each option has a different amount of growth and defensive types of assets that spread the risk. The Pre-mixed options are:

• Balanced (default)

• Conservative

• Moderate, and

• High Growth

Asset class optionsOur asset class specific options are just that, options that invest solely in one asset class. The asset class options are:

• Cash

• Indexed Shares

• Australian Shares

• International Shares, and

• Property

Investment advisers and consultants Arcadia Funds Management Limited Bell Asset Management Limited Thomas Murray (Australasia) Pty Ltd Towers Watson

Acadian Asset Management (Australia) Limited

Acorn Capital Ltd

Arrowstreet Capital LP

Aviva Investors Global Services Limited

Bell Asset Management Limited

Brandywine Global Investment Management LLC

Bridgewater Associates Inc.

Colonial First State Asset Management (Australia) Ltd

DFA Australia (Dimensional)

GMO Australia Limited

JCP Investment Partners Ltd

Karara Capital Limited

Lazard Asset Management Limited

Macquarie Investment Management Limited

ME Bank

MFS Investment Management

Northcape Capital Pty Ltd

Palisade Investment Partners

QIC Limited

Sankaty Advisors LLC

Schroder Investment Management Australia Limited

Stone Harbor Investment Partners LP

Vanguard Investments Australia Ltd

Veritas Asset Management (UK) Limited

The Balanced (default) optionLUCRF’s Balanced (default) investment option has a diversified mix of both growth and defensive asset classes.

This option provides a broad range of investments. It is designed to offer both growth and protection over the long-term.

Since the Fund’s inception, our Balanced option has produced an average annual return to members of 9.75% (1978 to 2012).

Whilst past performance is not a reliable indicator of future investment returns, our history over more than 30 years show that despite investment markets moving up and down, our Balanced option has provided members with a healthy return over the long-term.

Investment Managers as at 30 June 2012


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

Balanced (default)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.

Investment strategyTo invest in a diversified range of investments, with approximately 76% in shares, growth property and growth alternative investments, and approximately 24% in cash, fixed income, defensive alternatives and defensive property.

Growth ..........................76%

Defensive .....................24%

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

Risk of short-term negative return

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.

Expected frequency of negative

annual returns in any 20 year period

3.8

Risk band (1 to 7)

5

Risk label

Medium to high

Type of investor

Balanced

Investment fee#

0.69%

% Ranges

Australian shares 25.5% 18–33%

International shares 23.5% 17–31%

Property 10.0% 3–15%

Alternatives 27.0% 15–40%

Fixed interest 12.0% 3–20%

Cash 2.0% 0–4%

Strategic asset allocation^

25.5%

12%27%

10%

2%

23.5%

10.9%

11.5%

8%9.5%

30.1%

30%

26.7%15.1%

16.7%

15.8%

5.9%

19.8%

31.8%30.4%

31.7%6.1%

ConservativeInvestment strategyTo 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%


Risk of short-term negative returnLow 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.



1.4

Risk band (1 to 7)

3

Risk label

Low to medium

Type of investor

Conservative

Investment fee#

0.48%

% Ranges

Australian shares 11.5% 8.5–14.5%





Cash 30.0% 20–40%

Strategic asset allocation ^

25.5%

12%27%

10%

2%

23.5%

10.9%

11.5%

8%9.5%

30.1%

30%

26.7%15.1%

16.7%

15.8%

5.9%

19.8%

31.8%30.4%

31.7%6.1%

Pre-mixed options


ModerateInvestment strategyTo 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%


Risk of short-term negative returnLow 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.



2.6

Risk band (1 to 7)

4

Risk label

Medium

Type of investor

Moderate

Investment fee#

0.60%

% Ranges






Cash 15.1% 10–20%


25.5%

12%27%

10%

2%

23.5%

10.9%

11.5%

8%9.5%

30.1%

30%

26.7%15.1%

16.7%

15.8%

5.9%

19.8%

31.8%30.4%

31.7%6.1%

#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.

^Pre–mixed Strategic asset allocation as at 30 June 2012, see www.lucrf.com.au for current asset allocations.

Asset Allocation Balanced Conservative Moderate High GrowthAustralian Shares 29.0% 11.5% 17.6% 34.4%International Shares 25.0% 11.5% 17.4% 34.5%Property 9.0% 10.0% 7.0% 7.0%Alternatives 21.0% 6.0% 15.0% 24.0%Fixed Interest 14.0% 40.0% 37.0% 0.1%Cash 2.0% 21.0% 6.0% 0.0%Total 100.0% 100.0% 100.0% 100.0%

High Growth

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

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

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


Risk of short-term negative returnModerate 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.



4.4

Risk band (1 to 7)

6

Risk label

High

Type of investor

High Growth

Investment fee#

0.75%

% Ranges





Fixed interest 0.0% 0.0%

Cash 0.0% 0.0%

25.5%

12%27%

10%

2%

23.5%

10.9%

11.5%

8%9.5%

30.1%

30%

26.7%15.1%

16.7%

15.8%

5.9%

19.8%

31.8%30.4%

31.7%6.1%


Investment Option Asset Allocation as at 30 June 2011


Asset Class options

Indexed SharesInvestment strategyTo invest in shares on a passive basis, with approximately half in Australian shares and the balance in international shares.

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

Defensive ..........................0%

Investment objectiveTo achieve a return (gross of tax and investment expenses) that matches the change in a 50%/50% combination of the S&P/ASX300 Accumulation Index and the MSCI World (ex-Australia) Accumulation Index over moving 3 year periods, and to limit the probability of achieving a negative return to approximately 1 year in 4.


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.

Expected frequency of negative annual returns in any 20 year period

5.3

Risk band (1 to 7)

6

Risk label

High

Type of investor

Aggressive

Investment fee#

0.39%

% Ranges

Australian shares 50% 48–52%*

International shares 50% 48–52%*

100%

100%

100%

100%

50%

50%


Cash

Investment strategyTo invest in a portfolio consisting primarily of bank deposits, but which may include other short-term securities.

Growth ...............................0%

Defensive ....................100%

Investment objectiveTo 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.


Very low The chance of a negative return in any 1 year is very low.



Never

Risk band (1 to 7)

1

Risk label

Very low

Type of investor

Short-term

Investment fee#

0.20%

Cash 100%

100%

100%

100%

100%

50%

50%


Each option invests in a single asset class

^Strategic asset allocation as at 30 June 2012.

Note: The asset allocation was the same at 30 June 2011.

* From time time to time these options may hold cash


Australian SharesInvestment strategyTo invest in Australian shares on an actively managed basis.

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

Defensive ..........................0%

Investment objectiveTo achieve a return (gross of tax and investment expenses) that exceeds the change in the S&P/ASX300 Accumulation Index over moving 3 year periods, and to limit the probability of achieving a negative return to approximately 1 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.



6.1

Risk band (1 to 7)7

Risk labelVery high

Type of investorAggressive

Investment fee#

0.60%

Australian shares 100%*

100%

100%

100%

100%

50%

50%


International Shares

Investment strategy

To invest in international shares on an

actively managed basis.

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

Defensive ..........................0%

Investment objectiveTo achieve a return (gross of tax and investment expenses) that exceeds the change in the MSCI World (ex-Australia) 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 returnHigh 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.



5.2

Risk band (1 to 7)

6

Risk label

High

Type of investor

Aggressive

Investment fee#

0.65%

International shares 100%*


100%

100%

100%

100%

50%

50%

PropertyInvestment strategy

To invest in listed property trusts on a

passive basis.

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

Defensive ..........................0%

Investment objectiveTo achieve a return (gross of tax and investment expenses) that equals the change in the S&P/ASX300 Property Trust 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 returnHigh 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.



5.9

Risk band (1 to 7)

6

Risk label

High

Type of investor

Aggressive

Investment fee#

0.39%

Listed property trusts 100%*


100%

100%

100%

100%

50%

50%


PerformanceresultsMonthly declared results 2011/12

LUCRF Super Monthly RatesMonthly Rates - Super

Balanced Conservative Moderate High Growth

Cash Indexed Shares

Australian Shares


Property

July 2011 -1.11% 0.05% -0.36% -1.92% 0.38% -3.12% -4.23% -2.73% -2.51%

August 2011 -1.22% -0.10% -0.45% -1.63% 0.38% -2.67% -1.80% -3.91% 1.73%

September 2011 -1.93% -0.31% -0.85% -2.21% 0.36% -2.09% -4.32% -1.53% -3.29%

October 2011 2.41% 1.14% 1.54% 3.02% 0.36% 3.26% 6.05% 3.30% 2.69%

November 2011 -0.33% 0.29% 0.10% -0.68% 0.33% -1.03% -2.93% 0.09% 1.83%

December 2011 -0.28% 0.22% 0.03% -0.53% 0.29% -0.53% -1.32% -0.08% -1.88%

January 2012 2.11% 1.02% 1.40% 2.44% 0.27% 2.62% 3.90% 1.94% 3.89%

February 2012 1.90% 0.88% 1.22% 2.17% 0.32% 1.99% 2.23% 3.21% 1.57%

March 2012 1.44% 0.78% 1.13% 1.93% 0.32% 2.64% 2.04% 3.41% -2.48%

April 2012 0.15% 0.44% 0.38% 0.02% 0.46% -0.11% 0.02% -1.45% 6.16%

May 2012 -1.84% -0.35% -0.80% -2.49% 0.30% -3.32% -5.21% -2.69% -1.34%

June 2012 -0.01% 0.06% -0.10% -0.17% 0.32% 0.06% 0.56% 0.70% 0.46%

LUCRF Pension Monthly RatesMonthly Rates - Pension

Balanced Conservative Moderate High Growth

Cash Indexed Shares

Australian Shares


Property

July 2011 -1.39% 0.00% -0.54% -2.36% 0.47% -3.94% -3.93% -3.47% -6.54%

August 2011 -1.51% 0.12% -0.51% -2.06% 0.46% -3.36% -2.27% -4.93% 2.44%

September 2011 -2.40% -0.39% -1.01% -2.72% 0.43% -2.64% -5.34% -1.72% -4.58%

October 2011 3.03% 1.40% 1.89% 3.74% 0.46% 4.11% 7.60% 4.12% 3.75%

November 2011 -0.35% 0.45% 0.23% -0.79% 0.42% -1.27% -3.48% 0.17% 2.58%

December 2011 -0.39% 0.16% -0.08% -0.70% 0.35% -0.65% -1.75% -0.16% -2.60%

January 2012 2.65% 1.27% 1.73% 3.02% 0.35% 3.26% 4.78% 2.45% 5.33%

February 2012 2.47% 1.08% 1.52% 2.69% 0.47% 2.53% 2.72% 4.08% 2.20%

March 2012 1.82% 0.92% 1.49% 2.57% 0.41% 3.40% 1.77% 4.16% -0.65%

April 2012 0.10% 0.53% 0.37% -0.05% 0.39% -0.22% 0.72% -1.61% 5.45%

May 2012 -2.28% -0.42% -0.97% -3.06% 0.36% -4.13% -6.39% -3.32% -1.79%

June 2012 0.06% 0.06% 0.00% 0.09% 0.32% 0.40% 0.00% 0.72% 4.31%


Crediting Rates

*This is the investment option that most members are in and the option which your super and pension investment automatically defaults to, unless you instruct otherwise.

Average annual return for Balanced investment option since inception 1978 to 2012 is 9.75% p.a.

Please note: The International Shares, Australian Shares and Property investment options were introduced on 22 July 2005. The Indexed Shares and Cash options were introduced on 1 July 2000. The Conservative, Moderate and High Growth options were introduced on 1 September 2010.

Past performance is not a reliable indicator of future investment returns.

Crediting Rates financial years 1 July to 30 June and historicalPension Rates 2011/

122010/

11 2009/

102008/

092007/

085 Yr Average

2008/12Average since

inception

Pre-Mixed

Balanced* 1.62% 11.76% 8.71% -14.06% -6.20% -0.10% 1.85%

Conservative 5.28% 5.77% N/A N/A N/A N/A N/A

Moderate 4.15% 6.60% N/A N/A N/A N/A N/A

High Growth 0.07% 8.16% N/A N/A N/A N/A N/A

Asset Class

Cash 5.00% 5.24% 4.62% 4.56% 6.67% 5.22% 5.22%

Indexed Shares -2.96% 7.43% 9.03% -17.02% -17.10% -4.80% -4.80%

Australian Shares -6.35% 14.36% 19.02% -17.59% -12.33% -1.63% -1.63%

International Shares -0.08% 12.57% 8.98% -18.13% -20.52% -4.42% -4.42%

Property 9.39% 5.41% 19.55% -37.92% -37.49% -11.76% -11.76%

Crediting Rates financial years 1 July to 30 June and historicalSuper Rates 2011/

122010/

11 2009/

102008/

092007/

082006/

072005/

065 Yr

Average 2008/12

10 Yr Average 2003/12

Pre-Mixed

Balanced* 1.18% 9.92% 7.11% -13.37% -6.49% 16.02% 16.60% -0.71% 5.38%

Conservative 4.18% 5.19% N/A N/A N/A N/A N/A N/A N/A

Moderate 3.24% 6.22% N/A N/A N/A N/A N/A N/A N/A

High Growth -0.25% 6.95% N/A N/A N/A N/A N/A N/A N/A

Asset Class

Cash 4.18% 4.29% 3.02% 3.77% 5.43% 4.95% 4.48% 4.14% 4.53%

Indexed Shares -2.59% 6.27% 6.80% -16.78% -16.14% 16.43% 18.80% -5.05% 2.69%

Australian Shares -5.55% 12.06% 15.06% -16.80% -12.35% 26.79% 18.89% -2.35% N/A

International Shares -0.10% 10.61% 6.47% -16.19% -19.40% 6.91% 14.49% -4.49% N/A

Property 6.55% 6.90% 16.02% -34.40% -34.73% 24.87% 10.99% -10.76% N/A


Financial StatementsAnd other informationEnquiries and complaintsEnquiries and complaints can be made in a variety of ways (e.g. in a letter, by email, by telephone or in person). Any written complaint should be addressed to:

The Complaints Officer LUCRF Super PO Box 211 North Melbourne Vic 3051 Email: [email protected]

Complaints can be made by a Fund member, a previous member, a non-member spouse (re: Family Law split agreement), or from a (beneficiary/ies) or legal personal representative of a deceased member. Responses from the Fund will be dealt with promptly and certainly within 90 days as required by legislation.

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, Melbourne VIC 3001 Telephone: 1300 884 114 Website: 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 90 days, you may be able to take your complaint to the Financial Ombudsman Service, which is also a free service.

Financial Ombudsman Service GPO Box 3, Melbourne VIC 3001 Telephone: 1300 780 808 Website: www.fos.org.au

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.

Government supervisionLUCRF 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.

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 granted to LUCRF Pty Ltd (AFSL No. 258481) by the Australian Securities Investment Commission (ASIC), which enables personal and general superannuation advice to be provided. The Trustee is also approved to operate a non-cash payment facility (clearing house).

Identity fraudYou 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.

Visit the ASIC MoneySmart website at www.moneysmart.gov.au for useful superannuation information and scam updates.


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

Trustee ReserveThe 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.

Capital Adequacy ReserveThe after-tax value of any insurance rebate received, and tax benefit 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.

Operational Risk ReserveThis 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.

Contribution arrears – what we doLegislation 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), via phone calls or may also perform site visits to advise employers of arrears.

Indemnity insuranceThe 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 or 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. An ERF is not generally considered a suitable long-term investment vehicle for super.

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 Website: www.unclaimedsuper.com.au

Unclaimed moneyThe 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:

• 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 reasonable 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 returned 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.

Note: The Trustee relies on ASIC 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 upon request.


Statement of financial position as at 30 June

2012 2011

$’000 $’000

Investments

Cash - Australian $360,875 $254,361

Cash - Foreign Currency $5,928 $2,395

Term Deposits $47,178 $0

Australian Composite Fixed Interest $129,882 $101,861

Australian Sovereign Fixed Interest $0 $106,985

International Inflation Linked Bonds $0 $110,714

Cash Plus 2% $55,482 $52,311

Australian Equities $631,805 $744,691

Australian Micro Caps $49,532 $55,720

International Equities $569,286 $576,872

Emerging Markets Equities $86,708 $96,735

Inflation Plus $48,118 $0

Australian Property $258,672 $253,842

Private Equity $54,050 $57,124

Global Infrastructure $114,615 $93,813

Specialist Credit $197,498 $168,245

Global Credit $58,885 $0

Diversity $390,737 $232,102

Total Investments $3,059,251 $2,907,771

Other Assets

Cash and Cash Equivalents $5,504 $2,283

Contributions Receivable $27,696 $10,172

Sundry Receivable $1,013 $971

Accrued Income $16,022 $10,346

Unsettled Trades (Sales) $4,393 $804

Deferred Tax Asset $26,477 $16,150

Total Other Assets $81,105 $40,726

Total Assets $3,140,356 $2,948,497

Liabilities

Current Tax Liability -$4,938 -$16,433

Benefits Payable -$1,903 -$1,509

Unsettled Trades (Purchases) -$3,726 -$7,512

Sundry Payable -$3,662 -$6,391

Total Liabilities -$14,229 -$31,845

Net assets available to pay benefits $3,126,127 $2,916,652

Represented by: Liability for accrued benefits

Allocated to Members Accounts $3,096,833 $2,892,454

Investment Reserve $0 $0

Operational Risk Reserve $4,035 $3,293

Admin Guarantee Reserve (APRA) $500 $500

Administration Reserve $24,759 $20,405

Total $3,126,127 $2,916,652

Financial Statements 2011/12


2012 2011 2010

$’000 $’000 $’000

Investment Revenue $58,129 $283,868 $174,959

Other Income $2,088 $1,559 $523

Tax Benefit on Administration & Investment Expenses

$7,146 $6,967 $6,479

Insurance Rebate $703 $654 $551

Administration Fee Collected $12,061 $11,899 $11,797

$80,127 $304,947 $194,309

Outgoings

Administration Expenses -$14,534 -$13,969 -$13,849

Member Benefit Protection -$3,071 -$1,634 -$1,747

Direct Investment Expenses -$21,875 -$20,767 -$18,231

Tax Credit (Payable) out of Investment Income $2,739 -$20,194 -$7,350

Movement from (to) Reserves -$5,099 -$4,802 -$4,136

Total paid as interest to members $38,287 $243,581 $148,996

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

If you wish to obtain a copy of the auditor’s report and the full audited accounts, please contact us.

2012 2011

$’000 $’000 $’000 $’000

Net assets available to pay benefits at start of year $2,916,652 $2,521,920

Interest Income $15,742 $16,234

Dividend Income $144,701 $134,707

Net Property Income $1,138 $864

Change in Market Value -$109,349 $129,820

Other Investment Income $7,996 $60,228 $5,532 $287,157

Contribution Revenue

Employer Contributions $268,804 $228,841

Salary Sacrifice Contributions $23,224 $22,590

Member Contributions $20,176 $18,297

Government Co-contributions $2,614 $2,953

Transfer from Other Funds $102,511 $417,329 $86,653 $359,334

Other Revenue

Other Revenue $703 $654

Group Life Proceeds $11,809 $12,512 $11,289 $11,943

Opening net assets plus revenue $3,406,721 $3,180,354

Less Expenses & Outgoings

Benefits Paid and Payable -$194,250 -$161,245

Group Life Premiums -$15,490 -$14,104

Superannuation Surcharge Tax -$10 -$3

Administration Expenses -$14,534 -$13,969

Direct Investment Expenses -$21,886 -$22,493

Income Tax Expenses -$34,424 -$280,594 -$51,888 -$263,702

Net assets available to pay benefits at end of year $3,126,127 $2,916,652

Statement of change in net assets as at 30 June

This 2012 Annual Report is issued 28 August 2012 by LUCRF Pty Ltd ABN 18 005 502 090 AFSL 258481 as Trustee for LUCRF Super ABN 26 382 680 883.

It has been prepared without taking into account your personal financial situation, objectives or needs. Ratings (awards) are only one factor to be taken into account when deciding whether to join LUCRF Super. These ratings were current at the time of publication and may change. You should consider the suitability of the information to your own position and should you require advice that addresses your personal circumstances, please call 1300 130 780 and ask to speak to a qualified LUCRF Representative for personalised financial advice. To help you decide we recommend you read our current Super Member Guide (Product Disclosure Statement), Super Member Essentials (Additional Information and Financial Services Guide) and awards available from our website or by calling us.

We appreciate the contribution of our members who have given their permission for their quotes and images to appear in this document. At the time of publication, their authority had not been withdrawn.

LUCR

F030

4_ 0

9051

2

Contact LUCRF Super

1300 130 780Web: www.lucrf.com.auE-mail: [email protected]: PO Box 211 North Melbourne VIC 3051Fax: (03) 9326 6907

An award-winning fund

To keep up-to-date with the latest LUCRF Super news and all things #super, follow us on Twitter. Search for @LUCRFSuper or see www.twitter.com/lucrfsuper

2011/12 annual report - lucrf super pty ltd

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