Annual report December 2014

ed Pension er Account-bas SCOAL Sup n Fund and AU 4 1 3 1 0 2 t r o Annual rep erannuatio AUSCOAL Sup 16 December 2014 Inside Chair and CEO Rep...
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ed Pension

er Account-bas

SCOAL Sup n Fund and AU

4 1 3 1 0 2 t r o Annual rep erannuatio

AUSCOAL Sup

16 December

2014

Inside Chair and CEO Report

2

Snapshot 2013–14

4

Your investments

8

Managing the Fund

16

Accounts

20

Renumeration disclosure

24

Issued by AUSCOAL Superannuation Pty Ltd ABN 70 003 566 989 AFSL 246864 Trustee for the AUSCOAL Superannuation Fund ABN 16 457 520 308 MySuper authorised 16457520308485

Chair and CEO report AUSCOAL Super continues to build scale and efficiencies despite a mining industry downturn. The 2013-14 financial year was difficult for many of our members. The mining industry experienced a severe downturn due to falling coal prices and a high exchange rate. As a result, thousands of AUSCOAL Super members faced redundancy. On the flip side, we experienced solid growth in funds under management on the back of the share market, which experienced a second consecutive year of positive returns. Our funds under management grew by 15% to $8.2 billion and, despite the difficult industry conditions, we maintained membership at around 75,000 over the financial year and the number of employers grew 15%. We also finalised the merger with the Western Australian based Coal Industry Superannuation Fund. This added nearly 1,200 members to our fund. More importantly, the merger has given us a strong presence in Western Australia from which we can further grow. This growth helps us build scale and improve efficiencies creating greater value for members.

Improving your fund We continue to improve the products and services we offer our members.

New default investment option for pensions To meet the needs of our retired members, in September 2014 we introduced a new investment option to our account-based pension product, AUSCOAL Capital Guarded. This unique option is now the default option for pension members who don’t make an investment choice. AUSCOAL Capital Guarded is designed to meet the needs of people in retirement in three ways. It: ■■

invests in growth assets, such as shares and property, with the aim of earning a reasonable long-term return above inflation

■■

■■

employs strategies to reduce the risk of large losses. For instance, it invests a significant amount in income producing assets, where risk of capital loss is lower than investing in the share market. It also uses strategies expected to generate positive returns when share markets and other asset classes perform poorly uses strategies to take advantage of the different tax rules that apply to pensions.

Industry recognition We remain a top-rated fund, as recognised by independent super rating companies, with both our pension and super products receiving platinum ratings for performance by SuperRatings. Chant West also continued to rank us as a fiveapple super and pension fund. These ratings highlight that we’re a secure, value-for-money fund with sustainable long term investment returns. Cementing the work we’ve done to improve our accountbased pension, SuperRatings judged it a Pension Fund of the Year finalist for 2014 and in October 2014 it was again judged a finalist for 2015.

A greater presence to serve our members To better serve our members, we also opened a new office in Brisbane, adding to our on the ground presence in Mackay, Rockhampton, Wollongong, Warners Bay and Mudgee. This new office will make it even easier for members to receive face‑to-face help and advice about their super. We’re also planning a move for our Warners Bay head office, which will be relocating to Newcastle when our purpose-built larger offices are completed in late 2015. This move will provide employees with a more suitable and productive workplace. To ensure our members aren’t disadvantaged by this move, we’ll retain a presence in our Warners Bay location for members to see us face-to-face.

Ten year return to 30 June 2014 Super

Pension

AUSCOAL Aggressive

4.8%*

5.8%*

7.7%

AUSCOAL Growth

7.0%

7.9%

6.8%

AUSCOAL Balanced

6.8%

7.8%

6.3%

AUSCOAL Stable

6.7%

7.6%

5.8%

Past performance is not necessarily an indication of future performance. * Eight year return is shown, as option hasn’t existed for 10 years.

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AUSCOAL Super | 1300 AUSCOAL (1300 287 262) | www.auscoalsuper.com.au

Return target

Arthur Weston

Strengthening AUSCOAL Super’s management We’re positioning our fund for future growth by creating new roles to bring additional expertise to key areas. We appointed David Bell as Chief Investment Officer, who came on board in July 2014. David brings to us experience in investments, risk and portfolio management. He’ll oversee our investment portfolio, enhance the skills and capability of our investment team plus assist in product development.

Bruce Watson

Your privacy On 12 March 2014 new privacy laws came into place to strengthen individuals’ rights in relation to their personal information. The new laws require organisations to take reasonable steps to notify customers if they collect their personal information and explain why they’re collecting it.

SuperStream

In September 2014 we also appointed a Chief Financial Officer, Stephen Rowbottom, to strengthen our internal financial management resources. Stephen has extensive experience in finance, operations, governance, product development and administration.

The SuperStream reforms are ongoing and this year we’ve continued implementing the associated changes. Larger employers can now make payments for their employees via our QuickSuper service, while employers with less than 20 employees can use the government’s Small Business Clearing House facility. We’ll continue working with employers over 2014-15 to implement the SuperStream requirements.

Continued regulatory developments

Repeal of the Mining Tax

Over the past year we’ve continued to implement the government’s ongoing super reforms.

After much negotiation in the Senate, the government struck a deal to repeal the Mining Tax. Along with the repeal of this legislation the government froze the compulsory employer contribution rate at 9.5% until 1 July 2021, with the staged increase to 12% now not taking place until 1 July 2025.

MySuper We received regulatory authorisation to operate a MySuper product on 14 October 2013. This allows us to continue accepting compulsory super contributions. Besides a name change to the MySuper default Lifecycle Strategy, nothing else changed for members. The MySuper changes aim to make super easier to understand, with a standard set of features, keep fees low and ensure funds have basic death and disablement insurance. As a result of the changes MySuper has brought, on 1 July 2014 we had to change when members could claim on their Total and Permanent Disablement insurance to meet the new laws. Unfortunately this will make it harder for members to claim on their insurance, but the new definition only applies to new insurance from 1 July 2014.

On a positive note, the abolishment of the Low Income Superannuation Contribution, which the government intended to repeal at the same time as the Mining Tax, has been delayed by two years until 30 June 2017.

Account-based pensions From 1 January 2015 the way account-based pensions are assessed for Centrelink purposes will change. This means new account-based pensions starting from 1 January 2015 will be treated as a financial asset and deemed under the income test.

As always, we’re interested in your feedback and we encourage you to call or email us with your ideas. We’d like to thank our staff for their continued hard work over the year and our members for their support. Arthur Weston Chairman, AUSCOAL Super

Bruce Watson CEO, AUSCOAL Super

3

Snapshot 2014 Key fund facts at 30 June 2014 Membership

Funds under management

■■

Members – 74,339, down 2% over the year

■■

Employers – 5,613, up 15% over the year

Investment option

Contributions

30 June 2013 30 June 2014 $ millions $ millions

Change %

AUSCOAL Aggressive

1,875

2,277

21

1,792

2,071

16

■■

Employer contributions – down 1% over the year

AUSCOAL Growth

■■

Member after-tax contributions – up 29% over the year

AUSCOAL Balanced

1,846

2,201

19

Member before-tax (salary sacrifice) contributions – down 7% over the year

AUSCOAL Stable

722

862

19

Australian Shares

163

184

13

International Shares

57

72

38

27

28

4

■■

Transfers ■■

Transfers into AUSCOAL Super – steady over the year

Property

■■

Transfers out of AUSCOAL Super – up 2.9% over the year

Bonds

163

102

- 37

Cash

526

420

- 20

29

15

- 48

7,200

8,232

15

Average account balance ■■

Employer-sponsored members – $114,589, up 15% over the year

Term deposit Total

Feel confident because you’re with an award winning fund ■■

Chant West ‘5 apples’ rating for super and pension – the highest rating.

■■

SuperRatings ‘Platinum’ rating for super and pension – the highest rating awarded to the top 25% of funds. Our account-based pension was also a finalist in SuperRatings 2014 and 2015 Pension Fund of the Year awards.

■■

Have been in the Great Place to Work Institute’s ‘Top 50 Best Companies to Work for in Australia’ in the past six years.

Our fees re

main well b

elow

the industry average2

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AUSCOAL Super | 1300 AUSCOAL (1300 287 262) | www.auscoalsuper.com.au

Four great reasons why people are choosing to invest with us

1

We’ll help you feel confident about your future ■■

Our fees are 42% lower than the industry average on $50,000 account balances1.

■■

Our strong track record of stable returns should help you secure your future.

■■

As a not-for-profit super fund, we reinvest any surplus to create better products and services for our members.

■■

Choosing AUSCOAL Super means access to flexible and competitive insurance, helping protect you and your family (only available to super members).

■■

2

3

You can trust we’re here for the long term. Providing over 70 years of respectful and courteous service to Australia’s mining industry has earned us a solid reputation as one of the most awarded not-for-profit industry super funds.

Making it clear and easy for you ■■

Call our friendly and knowledgeable service officers whenever you have a question or need a hand.

■■

ccess information about your account through A our secure portal at www.auscoalsuper.com.au

■■

hoose to learn more about super and finances C through timely alerts, newsletters, seminars and workshops or help yourself get financially fit through The Gym, our interactive online education tool available to members via our secure portal.

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Personal financial solutions for you and your family ■■

Our top rated2 super, transition to retirement and pension products take care of you throughout your working life and into retirement.

■■

Our range of investment options offer you flexibility and choice: leave the investing to us or take control and mix and match investments and create the ideal investment structure to meet your goals.

■■

AUSCOAL Advice’s highly trained team of financial advisers offer a wide range of advice, aren’t paid commissions and act only in your best interests.

More than super There are certain events in life that can leave you, or loved ones, at a loss about what to do next. Be it a workplace accident, redundancy or even death, our experienced and empathetic customer service, financial advice and insurance staff are here to support you when you need it most.

“I like the returns and the fees are low and they have always been very helpful on the phone.” FEAL Member Surveys 2013

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SuperRatings Benchmark Report 2013 page11.

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AUSCOAL Super and AUSCOAL Super Account based Pension both carry a Platinum Rating and a 5 Apple Rating

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Snapshot 2014 (continued) Super rule changes from 1 July 2014 Compulsory super payment increased to 9.50% The compulsory super payments your employer must pay into your super account increased from 9.25% to 9.50% of your pay on 1 July 2014. These payments will remain at 9.50% until 1 July 2021, when they will gradually increase to 12% by 1 July 2025.

More generous contribution limits On 1 July 2014 the before-tax contribution limit increased for people aged: ■■

49 years and under from $25,000 to $30,000 pa

■■

between 49 and 59 years from $25,000 to $35,000.

For people aged 60 years and over, the limit remains at $35,000 pa. On 1 July 2014 the after-tax contribution limit also increased from $150,000 pa to $180,000 pa.

Excess contribution tax removed From 1 July 2014, if you contribute more than your contribution limit allows, you’ll no longer have to pay excess contributions tax of 31.5%. Instead, the amount above the contribution limit will be included in your assessable income and taxed at your marginal tax rate and you’ll receive a 15% tax offset to recover the contribution tax already paid on the contribution.

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However, you’ll need to pay an excess concessional contributions (ECC) charge on the increased amount to recognise that the tax on excess concessional contributions was collected later than normal income tax. You can also withdraw up to 85% of your excess before-tax contributions from your super account. Any withdrawn excess before-tax contributions will no longer count towards your after‑tax contribution limit.

Low Income Superannuation Contribution retained The Low Income Superannuation Contribution, which was to be repealed from 1 July 2014, will apply for a further two years until 30 June 2017.

Changes to how account-based pensions are assessed by Centrelink From 1 January 2015 deeming rules will be extended to account-based pensions. If you start your pension before this date and you receive income support payments, your pension will continue to be assessed under existing rules.

Transfer thresholds increasing for small lost super account To protect small super accounts from erosion by fees and insurance premiums, lost accounts with balances of less than $2,000 must be transferred to the Australian Taxation Office. This threshold will increase to $4,000 on 31 December 2015 and $6,000 on 31 December 2016.

AUSCOAL Super | 1300 AUSCOAL (1300 287 262) | www.auscoalsuper.com.au

Trust Deed changes The Trust Deed is AUSCOAL Super’s rule book. It sets out the Trustee’s powers and obligations, your rights and obligations and how we administer the Fund. The Trustee is responsible for ensuring the Fund is managed in line with the Trust Deed. During the 2013–14 financial year we amended the Trust Deed to allow us to operate the WA Coal Industry Superannuation Fund defined benefit scheme.

We remain a y fund

e value for mon

7

3. Your investments The 2013-14 financial year was a strong year in financial markets, where investors were generally rewarded for taking risk with higher returns. Introducing David Bell, Chief Investment Officer In 2014 David Bell joined AUSCOAL Super in the newly created role of Chief Investment Officer. This new role is responsible for the fund’s investment activities, in particular, selecting how much to invest in each asset class and choosing the investment managers to invest these assets, ensuring our investment operations run smoothly and our investments are correctly valued plus developing new tools to help members project their retirement incomes and hence make better decisions about their super. David comes to us with over 17 years experience in investment management, which included working for a major fund manager and running his own investment advisory business. David is also studying towards a PhD, where his major piece of research is on how to design investment portfolios to get the best result for people saving for retirement. We’re very excited to welcome David on board and seeing the benefits David’s skills and experience will bring to our members.

The year in review Over 2013-14 most asset classes performed strongly largely due to low interest rates in advanced economies and gradual improvements in the economic outlook. This was despite concerns that markets were overvalued. While the Australian sharemarket performed strongly, global share returns were even higher, as offshore companies were seen as having better prospects of growing earnings and

offered greater diversification, with Australian shares suffering from the downturn in the mining sector, which comprises a large portion of our share market. Australia also had higher interest rates than most other developed countries, dampening our share market returns. With global interest rates remaining low, government bond yields weren’t particularly attractive. However, corporate bonds performed strongly as the difference between government bonds and corporate bonds, called the spread, reduced. The positive investment markets contributed to strong recent performance and helped us outperform our investment objectives for our pre-mixed investment options over ten years. See the investment returns for the pre-mixed investment options on pages 10 and 11.

Investment outlook The current economic outlook is moderately positive, with the US, Chinese and Australian economies continuing to grow. However, the European recovery following the 2009 global financial crisis remains weak and some emerging markets are experiencing difficulties. An important focus going forward is on interest rates, as economic growth and market performance has been underpinned by extremely low interest rates globally. At some point interest rates will need to rise and this will impact markets. Although we feel most markets are a little expensive, we remain vigilant but we’re not reducing our holdings, as history shows markets can continue performing strongly even from a starting point of being slightly overvalued.

Our investment objectives – measuring performance When looking at your investment returns, it’s important to remember that your super is a long term investment. Our investment objectives reflect this and aim to provide strong, consistent and sustainable returns over the long term. For each investment option we set the long-term target return we want to deliver over ten years and the appropriate level of risk we’re prepared to take to achieve this return. We review these objectives at least annually, using historical and expected rates of return from the different asset classes. We then ensure a diverse range of investment managers invest in an appropriate mix of asset classes to manage risk. Our investment objectives are to deliver a specific return above inflation, measured by the consumer price index, over ten years. By considering inflation, we aim to ensure members’ retirement savings grow in real terms. This means your purchasing power grows through time. You can check the investment objective for each investment option on the tables on pages 10 to 13. Past performance isn’t necessarily an indication of future performance and investment objectives aren’t financial forecasts.

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AUSCOAL Super | 1300 AUSCOAL (1300 287 262) | www.auscoalsuper.com.au

Your investment options You can choose the investment options your super or pension is invested in. If you don’t want to make a choice, your money will be automatically invested in the default investment option. Choose how your money’s invested You can invest in one or any combination of the pre-mixed and asset class investment options, as long as your total investment adds up to 100%.

How to read the investment table on the following pages...

You can change how your money’s invested at any time by logging in to your account at www.auscoalsuper.com.au or by filling out the Make an investment choice form.

Description – Explains how the investment option is invested.

Leave the investing to us If you don’t choose what investment options to invest your money in, we’ll do it for you.

Super members We’ll invest your super in the default Lifecycle Strategy, which automatically invests your money in a pre-mixed investment option generally appropriate for your age. You’re automatically moved to a less aggressive investment option as you get older, as shown in the diagram below.

MySuper default Lifecycle Strategy Allocation to growth assets over the age lifecycle 100%

70% 60% 50%

up to 44

AUSCOAL Stable

0% Age

AUSCOAL Balanced

10%

AUSCOAL Growth

40% AUSCOAL Aggressive

% Allocated to growth assets

80%

20%

Asset mix – Shows the types of assets the investment option is invested in. Investment strategy – Breaks down the types of assets the investment option is invested in by asset class. It also shows how much of the investment option is generally invested (our target) in each asset class. Allowable ranges – The percentage range an investment option can be invested in each asset class around its target (investment strategy). Standard Risk Measure* – Describes risk based on how many negative annual returns you can expect over 20 years. It places this risk into one of seven risk labels ranging from very low to very high. Investment term – The minimum time you should invest in this option to have a high likelihood of achieving the investment objective.

90%

30%

Investment objective – The goal of the investment option over a rolling five year period. It’s not a guaranteed rate of return. The Consumer Price Index (CPI) is a measure of Australia’s inflation rate.

45–54

55–64

65 +

Pension members Pension members who don’t make an investment choice are invested in the new default investment option for the accountbased pension, AUSCOAL Capital Guarded. This option, which became the default investment option for pension members in September 2014, was specifically designed for people in retirement.

Five year compound rate – The compounded average of the previous five years’ annual returns. As super’s a long term investment, it’s a good way to see how your investment option is performing. You can also use it to see how the investment option is performing against its investment objective. Super investment option returns are after tax and investment management fees. Pension investment option returns are after investment management fees, but before the $180 pa administration fee, and aren’t taxed. Pension investment option returns are higher than super investment options returns when returns are positive because they’re tax free and lower when returns are negative because super returns benefit from credits for tax losses. Investment option returns before April 2005, which was when Coalsuper and QCOS merged to form AUSCOAL Super, reflect Coalsuper investment option returns, except AUSCOAL Balanced, which reflects QCOS investment option returns. These invested more in growth assets than AUSCOAL Balanced. Information about investment terms or timeframes is an indication only. What’s best for you depends on your circumstances. Past performance isn’t necessarily an indication of future performance and investment objectives aren’t financial forecasts.

*About the standard risk measure. We’ve measured risk using the super industry’s standard risk measure so you can compare investment options between different funds. The standard risk measure describes risk based on the number of negative annual returns expected over any 20 year period. It’s calculated using a simulated model that takes into account factors that may affect returns. This isn’t a complete assessment of investment risk, as it doesn’t show the size of negative returns, whether you’ll meet your investment objective or the impact of fees and taxes on your returns. The real world is complex and not always rational. This means mathematical theories may not always play out in practice. You need to be comfortable with the risk and potential losses of your chosen investment options. For more information about the standard risk measure, the Trustee’s risk assessment methodology and other types of investment risk, visit the investment section of our website at www.auscoalsuper.com.au

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Pre-mixed options Investment option

AUSCOAL Aggressive

AUSCOAL Growth

Description

Accepts higher risk to maximise returns

Aims to optimise the risk and return potential

Investment objective

Achieve a return exceeding the increase in the Consumer Price Index (CPI) by at least 5% pa, after tax and investment costs, over any 10-year period

Achieve a return exceeding the increase in the CPI by at least 4% pa, after tax and investment costs, over any 10-year period aggressive

Asset mix

100% Growth assets

Investment strategy

80% Growth assets 20% Income assets

32.5%

25%

Australian Shares International Shares Property Alternatives

22.5%

20%

aggressive

growth

10% 25%

Bonds Cash

22.5%

32.5%

10%

20–40% Australian shares 20–40% Intn’l shares 0–20% Property 10–30% Alternatives

Allowable ranges for investments

growth

10–30% Australian shares 10–30% Intn’l shares 0–20% Property 10–30% Alternatives 10–30% Bonds 0–10% Cash

balanced

Standard Risk Measure*

Risk label – Medium to high

Risk label – Medium

Estimated number of annual negative returns over any 20 year period – 3.0

Estimated number of annual negative returns over any 20 year period – 2.4

Investment term

At least five years

At least five years

1 year short

Investment option financial year returns

AUSCOAL Super (taxed) pa

2010 2011 2012 2013 2014 Ten year compound return

balanced

3 years medium

5+ years long

AUSCOAL Pension (untaxed) pa

10.2%

12.4%

10.7%

12.6%

-0.3% 16.3% 15.5% Aggressive Aggressive 4.8%#

-0.8% 19.7% stable 17.3% 5.8%# 7.7%

4.8%

Investment return

7.7%

5+ years long stable

3 years medium

AUSCOAL Super (taxed) pa 10.1%

AUSCOAL Pension (untaxed) pa 12.3%

10.1% 2.0% 13.3% Growth Growth 13.1% 7.0% 7.0%

7.0%

12.6% 2.3% 16.1% 14.9% 7.9% 6.8%

6.8%

4.8%

Investment objective#

Eight year CPI is 2.7% pa. #

1 year short

Investment return

Investment objective

Ten year CPI is 2.8% pa.

The compoundbalanced return and investment objective for AUSCOAL Aggressive is eight years as there is no 10 year return. balanced Stable Stable

Past performance is not6.8% necessarily an indication of future performance. 6.8% 6.7% 6.7% 6.3%

10

6.3%

AUSCOAL Super | 1300 AUSCOAL (1300 287 262) | www.auscoalsuper.com.au

5.8%

5.8%

aggressive

AUSCOAL Balanced

AUSCOAL Stable aggressive

growth AUSCOAL Capital Guarded

(Pension members only)

Aims to balance risk and return

Aims to offer diversification across major asset classes with some exposure to growth assets

Aims to offer diversification across major asset classes with some exposure to growth assets

Achieve a return exceeding the increase in the CPI by at least 3.5% pa, after tax and investment costs, over any 10-year period

Achieve a return exceeding the increase in the CPI by at least 3% pa, after tax and investment costs, over any 10-year period

Achieve a return exceeding the increase in the CPI by at least 3% pa, after tax and investment costs, over any 10-year period

growth

59% Growth assets 41% Income assets

balanced

40% Growth assets 60% Income assets

5%

8.7%

15%

36%

60% Growth assets 40% Income assets

20% 15%

10.0%

10.0%

8.7% 7%

balanced

10.0%

stable

5.0% 30.0%

9%

15.6%

40%

35.0%

20%

10–20% Australian shares 10–20% Intn’l shares 0–19% Property 6–26% Alternatives 26–46% Bonds 0–14% Cash

0–10% Australian shares 0–10% Intn’l shares 0–17% Property 3–23% Alternatives 30–50% Bonds 10–30% Cash

0-20% Australian Shares 0-20% International shares 0-10% Property 0-70% Alternatives 0-80% Bonds 0-40% Cash

Risk label – Low to medium

Risk label – Low to medium

Risk label - Low to medium

Estimated number of annual negative returns Aggressive Aggressive over any 20 year period – 1.7

Estimated number of annual negative returns Growth over any 20Growth year period – 1.4

Estimated number of annual negative returns over any 20 year period – 1.3

At least three years

At least three years

At least three years

1 year short

stable

7.7%7.7%

3 years medium 4.8%4.8%

7.0%7.0%

5+ years long

AUSCOAL Super AUSCOAL Pension (taxed) pa (untaxed) pa 9.9% 12.1% 9.4% 11.6% 3.3% 4.3% 10.8% 13.1% 11.0%balanced 12.6% balanced 6.8% 7.8% 6.8%6.8%

Investment return

6.3%6.3%

Investment objective

Ten year CPI is 2.8% pa.

1 year short

6.8%6.8% 3 years medium

AUSCOAL Super (taxed) pa 8.9% 8.3% 4.6% 8.0% 8.8% Stable Stable 6.7%

5+ years long

AUSCOAL Pension (untaxed) pa 10.8% 10.3% 5.6% 9.8% 9.9% 7.6%

1 year short

3 years medium

5+ years long

Not applicable, as this option started in September 2014

6.7%6.7% 5.8%5.8%

Investment return

Investment objective

Ten year CPI is 2.8% pa.

11

Asset class options Investment option

Australian Shares

International Shares

Property

Description

Australian share based investment

International share based investment

Australian and international property based investment

Investment objective

Achieve a return exceeding the increase in the CPI by at least 5% pa, after tax and investment costs, over any 10-year period.

Deliver a return exceeding the increase in the CPI plus 5% pa, after tax and investment costs, over any 10-year period.

Asset mix

100% listed Australian shares

100% listed international shares

Achieve a return exceeding the increase in the CPI by at least 3.5% pa, after tax and investment costs, over any 10-year period

100% Australian and international listed, unlisted and direct property

Investment strategy Australian Shares International Shares Property

100%

100%

100%

Standard Risk Measure*

Risk label – High

Risk label – Medium to high

Risk label – Medium

Estimated number of annual negative returns over any 20 year period – 4.7

Estimated number of annual negative returns over any 20 year period – 4.2

Estimated number of annual negative returns over any 20 year period – 2.7

Investment term

At least five years

At least five years

At least three years Aust shares

In

9.0% 1 year short

Investment option financial year returns

3 years medium

AUSCOAL Super (taxed) pa

AUSCOAL Pension (untaxed) pa

2010 12.7% 2011 10.1% 2012 -6.8% 2013 16.6% 2014 17.6% Aust shares Aust shares Ten year compound return 9.0% 9.0%

5+ years long

 15.8% 13.6% -9.1% 20.7% 19.6% 10.1%

1 year short

3 years medium

AUSCOAL Super (taxed) pa

5+ years long

AUSCOAL Pension (untaxed) pa

12.0% 9.4% 1.1% 20.0% 18.2% Intl shares Intl shares 4.7%

14.1% 11.6% 1.1% 28.5% 20.0% 5.8%

7.8%

7.8% 4.7%

Investment return

Investment objective

Ten year CPI is 2.8% pa.

AUSCOAL Super (taxed) pa

7.8%

5+ years long

AUSCOAL Pension (untaxed) pa

-2.0% 9.8% 4.2% 6.3% 9.6% Property 4.7%

- 1.9% 11.9% 4.7% 9.6% 10.4% 5.3%

Property Property

7.8%

Investment return

Investment objective

Ten year CPI is 2.8% pa.

Bonds Bonds

6.4%

Investment return

Investment objective

Ten year CPI is 2.8% pa.

6.4%

AUSCOAL Super | 1300 AUSCOAL6.3% (1300 6.3% 287 262) | www.auscoalsuper.com.au 4.7%

6.3%

4.7%

4.7%

Past performance is not necessarily an indication of future performance.

4.7%

3 years medium

9.0% 7.8%

12

1 year short

4.8%

4.8%

Cash

Bo

Investment option

Bonds

Cash

Term Deposit

Description

Australian bond and international bond based investment

Cash based investment

Investment with an Australian Authorised Deposittaking Institution for a fixed investment term at a fixed rate of interest

Investment objective

Achieve a return exceeding the increase in the CPI by at least 2% pa, after tax and investment costs, over any 10-year period

Achieve a return exceeding the increase in the CPI by at least 1% pa, after tax and investment costs, over any 10-year period

Offer members a fixed term, fixed interest rate product

Asset mix

100% Australian and international bonds

100% cash and cash equivalents, such as bank bills, term deposits and cash management accounts

100% income assets

Investment strategy Bonds Cash Term Deposit

Aust shares

100%

Intl shares

100%

100%

9.0% 7.8%

7.8% 4.7%

ust shares

Standard Risk Measure*

Risk label – Low to medium

Risk label – Very low

Risk label – Very low

Estimated number of annual negative returns over any 20 year period – 1.3

Estimated number of annual negative returns over any 20 year period – None

Estimated number of annual negative returns over any 20 year period – None

Investment term

From one to five years

Cash is a short-term investment Property not suitable for investors with more than three years to invest

The Fixed Term Deposit is a shortBonds term investment generally not suitable for investors who have more than three years to invest their super.

Intl shares

9.0% 7.8%

7.8% 1 year short

3 years medium

5+ years long

4.7%

Property

4.7%

1 year short

4.7%3 years medium

6.3%

6.4% 5+ years long

Investment option financial year returns

AUSCOAL Super (taxed) pa

AUSCOAL Pension (untaxed) pa

AUSCOAL Super (taxed) pa

AUSCOAL Pension (untaxed) pa

2010 2011 2012 2013 2014 Ten year compound return

12.0% 7.6% 7.6% 5.1% Bonds 6.8% 6.4%

14.6% 9.4% 9.9% 6.0% 7.5% 7.4%

3.1% 4.0% 3.8% 2.9% Cash 2.8% 4.1%

4.0% 5.1% 5.0% 3.9% 3.2% 4.8%

6.3%

1 year short

3 years medium

5+ years long

4.8%

Not applicable. The Term Deposit option pays a fixed rate of interest if held to maturity.

6.4%

Investment return

4.8%

4.1%

Investment objective

Investment return

Ten year CPI is 2.8% pa.

3.8%

Investment objective

Ten year CPI is 2.8% pa.

Cash

Past performance isn’t necessarily an indication of future performance.

13 4.1%

How we invest How we calculate investment earnings Each business day we calculate a unit price for each investment option. We then use this unit price to calculate the value of your account each day by multiplying the number of units you have been allocated in an investment option by their unit price. The unit price can move up and down in line with changes in the value of the underlying assets.

Latest declared unit price When you check your account balance, it’s important to know that it isn’t calculated using that day’s unit price. Your account balance is calculated using the ‘latest declared unit price’, which is generally two days old. This is because it generally takes two days for us to receive the day’s transaction and valuation information from each

investment manager, verify and collate this information for each investment option then calculate and declare the unit price. You can check the most recent unit prices at www.auscoalsuper.com.au under Investments.

Derivatives A derivative is a security whose price is dependent upon, or derived from, one or more underlying assets, such as shares, bonds, commodities, currencies and interest rates. Derivatives are used to either gain an exposure, or hedge an exposure, to the underlying asset. We allow some of our investment managers to use derivatives, but we’ve placed strict rules around how they do this, including a limit on how much they can invest in derivatives and when derivatives can be used.

Investment manager changes Australian Shares New managers ■■

Novaport Capital

Removed managers ■■

KOSMOS Asset Management

Making it easier to save

in super

14

AUSCOAL Super | 1300 AUSCOAL (1300 287 262) | www.auscoalsuper.com.au

How we invest (continued) Investment managers We appoint professional investment managers to manage your money. Our team of investment experts are continually researching, analysing and meeting with investment managers. We regularly review the manager’s performance and can remove managers and add new ones.

Asset class

Investment managers as at 30 June 2014

Shares Australian shares

Acorn Capital Cooper Investors Hyperion Asset Management

■■

Acadian Asset Management Copper Rock First State Stewart Genesis Emerging Markets Company Lazard Asset Management

■■

■■

■■

Franklin Templeton Investments Kapstream Capital Mondrian Investment Partners

Government linked bonds

■■

Kapstream Capital

Inflation-linked bonds

■■

Ardea Investment Management

Other

■■

Super Loans Trust

Cash

■■

Colonial First State Queensland Investment Corporation (QIC) Authorised deposit-taking institutions

■■ ■■ ■■

International shares

■■ ■■ ■■ ■■ ■■

■■ ■■

■■ ■■ ■■

Independent Asset Management Novaport Capital Perennial Investment Partners LSV Asset Management Orbis Investment Management State Street Global Advisors (currency manager) Trilogy Global Advisors

Bonds Absolute return

■■ ■■

■■ ■■

■■

Putnam Investments Schroder Investment Management Australia

■■

PIMCO

Alternatives Hedge funds

■■

Australian Farms Funds Management K2/D&S Management

Return seeking bonds

■■

Babson Capital

Multi asset strategy

■■

Schroder Investment Management Australia

Private markets

■■ ■■

Infrastructure – AMP Capital Investors, Investec and Lazard Asset Management Private equity – BlackRock, Blackstone, Champ 3, EQT Fund, Goldman Sachs, HarbourVest, Oaktree, Standard Life Capital Partners and Wilshire Private Markets Group

Currency hedging

■■

State Street Global Advisers

Property

AMP Capital Investors is our implemented property manager. This means they decide which property sectors and managers we invest in. ■■ Australian unlisted property – Altis, AMP Capital Investors, Colonial First State, DEXUS Property, Goodman, GPT Group, Industry Super, Lend Lease and Mirvac ■■ International unlisted property – Goodman, Retirement Villages Group and Rockspring ■■ International listed property – INVESCO and Principal ■■ Directly owned property

Term Deposit

Authorised deposit-taking institutions

■■

For more information about our investment managers, go to www.auscoalsuper.com.au and click on How we invest your money under Investments.

15

Managing the Fund The Trustee

The Trustee’s Board of Directors

The Trustee’s job is to make sure the Fund:

The Trustee has a Board of nine Directors.

■■

works in the best interests of members and their beneficiaries

■■

follows the Trust Deed, the Fund’s rule book

■■

follows super laws, rules and regulations.

■■

Four member Directors with three nominated and appointed by the CFMEU and the fourth nominated for appointment by other unions representing members in the NSW, QLD and Tasmanian coal mining industry, including the Association of Professional Engineers, Scientists and Managers Australia (APESMA), Communications Electrical Plumbing Union (CEPU) and Australian Manufacturing Workers Union (AMWU) and appointed by the CFMEU.

The Trustee for AUSCOAL Super is AUSCOAL Superannuation Pty Ltd. It’s a company jointly owned on behalf of coal industry employers and employees by the: ■■

NSW Minerals Council (NSWMC) – 25%

■■

Queensland Resources Council (QRC) – 25%

■■

■■

Construction Forestry Mining Energy Union (CFMEU), Mining and Energy Division – 50%.

Four employer Directors, with two nominated and appointed by the NSWMC and two by the QRC.

■■

One Director is an independent director nominated and appointed by the Trustee Board.

The Trustee is licensed to operate a public offer super fund by the Australian Prudential Regulation Authority (APRA), the government body that supervises the super industry. The Trustee is authorised by APRA to offer a MySuper product and its authorisation number is 16457520308485. The Australian Securities and Investments Commission (ASIC) has given the Trustee an Australian Financial Services Licence, number 246864, to provide general financial product advice on super.

Catherine Bolger

Arthur Weston

John Crocker

Christina Langby (Appointed 1 July 2014)

Kieren Turner

Julia Fellows

Graeme Osborne

Henry Skene (Resigned 30 June 2014)

16

AUSCOAL Super | 1300 AUSCOAL (1300 287 262) | www.auscoalsuper.com.au

Mark Watson

Grahame Kelly

Directors during the year ending 30 June 2014 Nominated by

Date appointed and resigned

Grahame Kelly, Deputy Chair

CFMEU

24 October 2006

Board – 9/9 Investment Committee – 6/6 Strategy Committee# – 3/3

Graeme Osborne

CFMEU

31 August 2005

Board – 9/9 Claims Committee – 12/12 Remuneration and Organisational Development Committee – 3/4

Catherine Bolger

APESMA

1 July 2013

Board – 7/9 Audit, Risk and Compliance Committee – 3/4

Mark Watson

CFMEU

1 July 2013

Board – 8/9 Audit, Risk and Compliance Committee – 3/4

Arthur Weston, Chair

QRC

26 April 2005

Board – 9/9 Investment Committee – 6/6 Strategy Committee# – 3/3 Remuneration and Organisational Development Committee – 4/4

Julia Fellows

QRC

26 April 2005

Board – 9/9 Investment Committee – 6/6 Claims Committee – 12/12

Henry Skene

NSWMC

22 February 2010 30 June 2014

Board – 6/9 Audit, Risk and Compliance Committee – 3/4 Strategy Committee# – 3/3

Kieren Turner

NSWMC

9 December 2009

Board – 8/9 Audit, Risk and Compliance Committee – 4/4 Remuneration and Organisational Development Committee – 4/4

Trustee Board

1 May 2008

Board – 8/9 Investment Committee – 6/6 Strategy Committee# – 3/3

Kaye Tidmarsh

QRC

29 May 2009

Denis Porter

NSWMC

23 August 2011

Tim Whyte

CFMEU

1 July 2013

Board and Committees attendance*

Member Directors

Employer Directors

Independent Director John Crocker

Alternate Directors

* The numbers shown reflect the number of meetings attended for the year compared to the number held for the 2013-14 financial year. If a director was appointed part-way through the year, the number of meetings shown reflects the number of meetings held and attended since their appointment. #

Committee ceased on 30 June 2014.

17

Managing the Fund (continued) Board and Committee changes Henry Skene retired from the Board on 30 June 2014. Christina Langby was appointed to the Board on 1 July 2014. Changes to Committees during the year are shown in the following sections.

Remuneration and Organisational Development Committee – considers if staff and Directors’ salaries are fair and responsible and assists with organisational and staff development and training programmes. Monitors human resources and Workplace Health and Safety matters. ■■

Chair: Kieren Turner

Board Committees

■■

The Board has established Committees to advise it and make decisions on important issues affecting your super. Trustee Directors and some external people with specialist skills are part of these Committees.

embers: Arthur Weston, M Graeme Osborne

Strategy Committee – Reviews the Fund’s long-term direction and considers if we’re well-placed to deal with long-term changes in the super industry. This committee was wound up effective 1 July 2014.

These Committees are:

■■

Chair: John Crocker

Investment Committee – Makes decisions on how your super is invested, including which investment managers and investment sectors to invest in. Sets investment objectives and strategies and monitors investment performance.

■■

Members: Grahame Kelly, Arthur Weston, Henry Skene

■■

Chair: John Crocker

■■

embers: Arthur Weston, M Julia Fellows, Grahame Kelly

Audit, Risk and Compliance Committee – Checks the Fund is following all the government laws, rules and regulations. Monitors risk management, compliance, audit and other governance activities. ■■

Chair: Mark Watson

■■

embers: Kieren Turner, M Catherine Bolger, Christina Langby, Henry Skene (retired)

18

Insurance Committee – Formed on 1 July 2014. Reviews insurance claims, including disputed and complex claims. Makes decisions on the payment of some claims. Reviews insurance policy arrangements and oversees Insurance Management Framework. ■■

Chair: John Crocker

■■

Members: Julia Fellows, Graeme Osborne, Christina Langby

Claims Sub-committee – Reviews insurance claims, including disputed and complex claims. Makes decisions on the payment of some claims. ■■ Chair: Graeme Osborne ■■

Member: Julia Fellows

AUSCOAL Super | 1300 AUSCOAL (1300 287 262) | www.auscoalsuper.com.au

Trustee indemnity insurance The Trustee holds a current indemnity insurance policy.

Eligible Rollover Fund At no time will we transfer your super out of the Fund to an Eligible Rollover Fund.

Superannuation Contributions Surcharge Superannuation contributions surcharge is paid for by deducting the amount directly from the affected members’ account.

Late payment of employee contributions We have a process in place to manage employers who are late making compulsory contributions for their employees.

Professional advisers and service providers The Trustee has appointed the following organisations to perform the relevant roles for AUSCOAL Super: Auditor

PricewaterhouseCoopers – ABN 52 780 433 757

Actuary

Mercer Consulting (Australia) Pty Ltd – ABN 55 153 168 140

Banker

Commonwealth Bank of Australia – ABN 48 123 123 124

Lawyers

Mercer Legal Pty Ltd – ABN 11 091 577 632; Clayton Utz - ABN 35 740 217 343

Asset Consultant

Mercer Investments (Australia) Limited – ABN 66 008 612 397

Master Custodian

JPMorgan Chase Bank – ABN 43 074 112 011

Financial Planning

AUSCOAL Services Pty Ltd ABN 49 051 315 014, trading as AUSCOAL Advice, a Corporate Authorised Representative of Adviser Network Pty Ltd ABN 25 056 310 699 AFSL 232729

Insurer: Death and Total and Permanent Disablement

OnePath Life Limited – ABN 33 009 657 176

Insurer: Income Protection

Hannover Life Re of Australasia Ltd – ABN 37 062 395 484

Income Protection Claims Administrator

Windsor Income Protection Pty Ltd – ABN 56 104 714 171

Administrator

AUSCOAL Services Pty Ltd – ABN 49 051 315 014. A company wholly owned by the Trustee. The Fund is administered on a profit to members basis to maximise member benefits.

Making a complaint If you have any issues or concerns about your super account, you can contact us on 1300 AUSCOAL (1300 287 262) or +61 (2) 4948 3333. If you need help writing a complaint letter, please contact one of our service officers. If you’re not satisfied with our response, you can lodge a complaint with us by phone, by emailing [email protected] or by writing to our Complaints Officer at AUSCOAL Superannuation Fund, PO Box 246 Warners Bay NSW 2282. If you’re not happy with our response or we don’t get back to you in 90 days, you can take your complaint to the Superannuation Complaints Tribunal (SCT). Generally, the SCT’s decision is final and we both have to follow it. You can contact the SCT by: ■■

Phone – 1300 884 114

■■

Mail – Locked Bag 3060, Melbourne Vic 3001

■■

Email – [email protected]

■■

Website – www.sct.gov.au

o look t e r e h We’re bers after our mem

19

Accounts

AUSCOAL Super PricewaterhouseCoopers audited the Fund for the year ended 30 June 2014 and provided an unqualified audit report. Set out below is an abridged version of the financial statements. Members can request a copy of the full audited financial statements and the Auditor’s Report. You can also download a copy at www.auscoalsuper.com.au/accounts

Statement of changes in net assets

Statement of net assets

for year ending 30 June 2014

Net assets available to pay benefits at beginning of period

for year ending 30 June 2014

$’000 2013

$’000 2014

6,289,603

7,280,570

$’000 2013

$’000 2014

Cash at bank

369,878

345,277

Short term deposits

357,144

332,911

182

519

Assets Cash and cash equivalents

Income Investment returns Interest

56,318

73,674

Trade and other receivables

Dividends

86,613

90,966

139,916

110,699

Other receivables and prepayments

1,040

925

Unit trust distribution Property rentals Change in net market value

605,861

719,741

15,968

2,889

Direct investment expenses

(27,117)

(34,944)

Total investment returns

878,599

963,950

Other income

Contributions Employer

525,747

517,615



22,129

Investment income receivable

61,267

53,104

Deferred tax assets

22,821

42,930

Current tax asset

Investments 263,353

285,274

Fixed interest securities

Money market securities

1,354,674

1,604,125

Equities

2,769,357

3,270,557

2,565,518

2,948,948

8,020

8,000

59,396

83,592

7,831,610

8,997,366

Derivatives

258,313

67,767

Sundry liabilities

280,113

320,529

12,614

64

Member

276,050

297,560

Unit trusts

Total contributions

801,797

815,175

Property Derivatives

Other revenue Transfer from CISB Insurance proceeds Total income



202,392

Total assets

15,550

17,878

Liabilities

1,695,946

1,999,395

(499,516)

(551,952)

(31,168)

(46,858)

Expenses Benefits paid Insurance expenses General administration expenses Income tax Surcharge expenses

(27,070)

(29,383)

(147,216)

(162,031)

(9)

(6)

Total expenses

(704,979)

(790,230)

Net assets available to pay benefits at 30 June

7,280,570

8,489,735

Tax liabilities Income tax payable Deferred tax



119,271

551,040

507,631

7,280,570

8,489,735

7,233,698

8,442,064

Death and disablement reserve (a)

6,589

6,391

Contingent liability and pensioner reserve (b)

1,856

1,956

25,459

26,757

268

281

Total liabilities Net assets available to pay benefits at 30 June Represented by: Liability for accrued benefits

Operational risk reserve (c) Administration reserve Capital reserve

12,000

11,297

Insurance reserve

200

382

Discretionary reserve

500

607

Turn over for footnotes (a) (b) (c)

20

AUSCOAL Super | 1300 AUSCOAL (1300 287 262) | www.auscoalsuper.com.au

Fund Reserves 2013–14 2012–13 2011–12 2010–11 2009–10 2008–09

AUSCOAL Super maintains the following reserves:

$m

$m

$m

$m

$m

$m

6.4

6.6

6.5

6.6

6.5

6.1

b) Contingent liability and pensioner reserve Pays pensions from the old Queensland Coal Mine Workers Pension Fund and mine workers not in the industry at the date of transfer in 1989.

1.9

1.8

1.8

1.8

1.7

1.6

c) Operational risk reserve Established on 30 June 2010 to manage the Fund’s operational risk events, such as errors or omissions.

26.7

25.4

35.6

30.5

8.1

d) Administration reserve Covers immediate liquidity and solvency requirements under the public offer licence.

0.28

0.27

0.26

e) Capital reserve Set aside by the Trustee to develop sustainable and competitive operations.

11.3

12.0

f) Insurance Stamp Duty reserve Facilitates and manages stamp duty differentials among states for Income Protection insurance.

0.4

0.2

g) Discretionary reserve Makes payments to members that aren’t appropriate to be paid from the Operational Risk Reserve arising from administration errors.

0.6

0.5

a) Death and disablement reserves Manage the self insured death and disablement, which was previously maintained under Part 2 of the Fund. These reserves are used to compliment the external insurance where it’s not adequate for those members eligible to a defined benefit.

The above reserve funds are invested in highly liquid assets meeting the requirements of the Australian Prudential Regulation Authority's Common Tier 1 Capital. The investment strategy is to meet the future obligations of all reserve accounts by protecting the capital of the reserve accounts in accordance with AUSCOAL Super's Reserve Policy.

ns

Our lo

etur r m r e t ng-

ver...

deli continue to

21

Mineworkers Pension Fund (closed) Originally formed in 1941 by NSW Government legislation as the NSW Coal and Oil Shale Mineworkers Superannuation Fund, the Mineworkers Pension Fund is now closed to new members. Members’ entitlements can only be paid on leaving employment in the coal industry. The majority of active members have transferred their entitlements to AUSCOAL Super. The Trustee continues to pay pensions to former coal mine workers who qualified or their surviving spouses.

Investments The Trustee has adopted the following long term strategic asset allocation for the Mineworkers Pension Fund’s defined benefit assets, with the objective of generating as high a long term real return as reasonably possible to keep the long-term cost down. Mineworkers Pension Fund investments at 30 June 2014 Asset class

Strategic asset allocation

Investment ranges

Fund manager

Australian inflation linked bonds

50%

40% – 60%

Ardea Australian Inflation Linked Bond Fund

Property

25%

20% – 30%

AMP Capital Investors (as implemented property manager)

Market neutral funds

25%

20% – 30%

Kapstream Absolute Return Income Fund and Schroders Cash Plus Fund

Actuarial review An actuary reviews the reserve every three years to ensure there are sufficient funds to meet liabilities. The latest actuarial investigation of the Fund’s defined benefits plan was conducted as at 30 June 2012 by Martin A Stevenson, Fellow of the Institute of Actuaries of Australia, on behalf of Mercer Consulting. The results of the investigation were reported to the Trustee in a report dated 16 May 2013.

Quotation from the Actuary ‘The total as at 30 June 2012 of active and dormant members’ vested benefits for the purposes of Australian Accounting Standard AAS25 (ie voluntary resignation benefits, or early retirement benefits if eligible as of right), amounted to $15.5m. The value of the assets of the Fund was less than the value of the liabilities of the Fund in respect of accrued benefits and pensions as at 30 June 2012 and I expect that assets will continue to be lower during the 3 years to 30 June 2015’. ‘However, I do not consider this to be of any concern since future contributions will be made until the assets become sufficient to cover the value of these liabilities. As at 30 June 2012, the assets of the Fund were sufficient to cover the vested benefits of active and dormant members (excluding the pension liabilities to be met by future contributions). The assets of the Fund were also sufficient to cover the accrued benefits of active and dormant members (excluding the pension liabilities to be met by future contributions). The valuation disclosed the Fund to be in a “satisfactory financial position” as defined in the SIS regulations (excluding the pension liabilities to be met by future contributions).’

Interest rate on resignation Members’ benefit entitlements are defined benefits. Defined benefits aren’t subject to investment earnings, the exception being resignation benefits. An interest rate is used to calculate resignation benefits for members resigning from employment in the industry. The interest rate is as follows: Annual interest rate Financial year ended 30 June

Interest rate

2009

- 4.9%

2010

8.5%

2011

6.9%

2012

11.3%

2013

3.3%

2014

6.36%

Three-year compound average

6.94%

Five-year compound average

7.25%

22

AUSCOAL Super | 1300 AUSCOAL (1300 287 262) | www.auscoalsuper.com.au

Fund accounts

Mineworkers Pension Fund (closed) Financial information Statement of changes in net assets

Statement of net assets

for year ending 30 June 2014

Net assets available to pay benefits at beginning of period

for year ending 30 June 2014

$’000 2013

$’000 2014

25,657

24,639

Change in net market value Other income Direct investment expenses Total investment returns

17

23

2,075

942

(1,081)

865

25

23

(13)

(10)

1,023

1,843

Employer

1,855

1,958

Total contributions

1,855

1,958

Total income

2,878

3,801

Expenses Benefits paid Income tax

801

44

202

3



49

20

Unit trusts

24,568

23,052

Total assets

25,086

24,075

447

103

Trade and other receivables

Contributions

General administration expenses

422

Assets Cash at bank

Investment returns Unit trust distribution

$’000 2014

Cash and cash equivalents

Income Interest

$’000 2013

(3,391)

(3,871)

(98)

(99)

(407)

(498)

Total expenses

(3,896)

(4,468)

Net assets available to pay benefits at 30 June

24,639

23,972

Other receivables and prepayments Investment income receivable Net deferred tax assets Financial assets

Liabilities Trade and other payables Sundry liabilities Total liabilities Net assets available to pay benefits at 30 June





24,639

23,972

23

Remuneration disclosure Guiding principles for AUSCOAL’s remuneration policy AUSCOAL Super’s remuneration policy for management and Directors has been established to : ■■

offer and maintain competitive remuneration

■■

provide internal equity

■■

provide incentive

■■

recompense for individual and company / Fund superior performance

■■

encourage behaviours that support the company’s ethical codes and achieve long term performance.

Remuneration is paid at the industry median, except for Key Management Personnel, where remuneration is paid at the level outlined on page 27. Remuneration is independently reviewed annually against an industry benchmark, taking into account movements in the target labour market, national economic indicators and the company’s financial performance over the previous fiscal year. Remuneration for all Directors, Alternate Directors and Key Management Personnel is set by the Remuneration and Organisational Development Committee and approved by the Board annually.

Directors’ remuneration Directors and Alternate Directors of AUSCOAL Superannuation Pty Ltd (AUSCOAL) are remunerated for the work they undertake as Directors. This remuneration covers the time spent preparing for and attending Board and Committee meetings and other activities throughout the year. Director remuneration consists of one or more of the following components: ■■

Short-term benefit, comprising a cash payment component.

■■

 ost-employment component, comprising a superannuation P payment to the Director’s nominated superannuation fund (where applicable to the individual Director).

Payment of remuneration Where Directors are directly employed by a company or union, remuneration payments may be made to the Director’s employer or union to compensate for the time they allow the Director to spend on AUSCOAL-related matters or may be retained by the Director on agreement with the company or union. Where Directors aren’t directly employed, the remuneration payments are paid directly to and retained by the Director.

Director fee levels Director remuneration was based on the following: Payment amount per annum (payable monthly in arrears)

2012–13

2013–14

Chair

$99,500

$106,000

Deputy Chair

$63,750

$67,750

Director

$51,250

$54,500

$47,000





$16,250

$23,750





$16,250

$14,750





$11,000

$14,750





$11,000

$14,750

$23,000

Board

Committee Chairs Independent Chair of Investment Committee Investment Committee Chair* Independent Chair Audit Risk and Compliance Committee Audit Risk and Compliance Committee Chair* Committee Members Independent Investment Committee Member Investment Committee Member Independent Audit Risk and Compliance Committee Member Audit Risk and Compliance Committee Member Independent Advisor to Committee members Audit Risk and Compliance Committee Adviser

* For the year ended 30 June 2014, the Committee Chairs received both the Committee Chair allowance and Committee Member allowance. In the prior year the Committee Chairs only received the Chair allowance.

24

AUSCOAL Super | 1300 AUSCOAL (1300 287 262) | www.auscoalsuper.com.au

For the years ended 30 June 2013 and 2014, remuneration paid to Directors, Alternate Directors and Independent Committee members and details of to whom the payments were made were as follows: Short term benefits Cash fees Year ended 30 June

Post-employment benefits Superannuation

Total

Paid to

2013

2014

2013

2014

2013

2014

$79,284

$83,094

$20,216

33,906

$99,500

$117,000









$63,750



Helen (Julia) Fellows

$51,250

$65,500





$51,250

$65,500

Self

Grahame Kelly

$51,250

$78,750





$51,250

$78,750

CFMEU

Graeme Osborne

$51,250

$54,500





$51,250

$54,500

CFMEU

John Crocker

$35,018

$62,829

$16,232

$18,921

$51,250

$81,750

Self

Henry Skene

$51,250

$40,500



$25,000

$51,250

$65,500

Self

Tim Ayres

$51,250







$51,250



Kieren Turner

$47,018

$59,954

$4,232

$5,546

$51,250

$65,500

Self

Kaye Tidmarsh*

$14,750







$14,750



Self

Mark Watson***

$14,750

$81,750





$14,750

$81,750

CFMEU

$5,673



$18,077

$23,000

$23,750

$23,000

Self

$18,894



$1,700



$20,594



Self

Catherine Bolger



$59,954



$5,546



$65,500

Self

Tim Whyte*













Christina Langby



-









Directors Arthur Weston Greg Betts

Denis Porter* Neil Cochrane**

Self CFMEU

AMWU

Directors are not entitled to annual leave, long service leave or performance payments. All Directors are or were Chairs of Committees and/or sit on one or more Board Committees. * These are Alternate Directors and Mr Porter and Ms Tidmarsh were Audit Risk and Compliance Committee members for the 12 month period 1 July 2012 to 30 June 2013. They were paid sitting fees for their Committee work. ** Mr Cochrane was an Independent Committee member and Chairman of the Investment Committee from 1 July 2011 to 8 December 2012. He was paid sitting fees for his Committee work. Since that date Mr Cochrane was an adviser to the Committee up to 28 February 2014. *** Mr Watson was an Alternate Director until 1 July 2013 and fees in the 2013 year were sitting fees for his role as a Committee member of the Audit Risk and Compliance Committee.

Related entity payments Some AUSCOAL Directors are also Directors on other Boards in the AUSCOAL Group and are separately paid fees by those Boards for their activities, as detailed below: Short term benefits Cash fees Year ended 30 June

Post-employment benefits Superannuation

Total

Paid to

2013

2014

2013

2014

2013

2014

$4,358



$392



$4,750



Greg Betts

$19,500

$25,275



$18,725

$19,500

$44,000

2013 CFMEU, 2014 self

Helen (Julia) Fellows

$19,500

$22,000





$19,500

$22,000

Self

$4,750







$4,750



CFMEU

Graeme Osborne

$19,500

$22,000





$19,500

$22,000

CFMEU

Denis Porter

$36,009

$37,875

$3,241

$6,125

$39,250

$44,000

Self

Mark Watson



$22,000







$22,000

CFMEU

Directors Arthur Weston

Grahame Kelly

Self

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Remuneration disclosure (continued) Training and professional development

Fixed annual remuneration component

Directors are required to undertake training and professional development activities throughout their term of office. These activities are undertaken in accordance with an agreed Training and Development Plan overseen by the Remuneration and Organisational Development (ROD) Committee and monitored by the Audit, Risk and Compliance Committee (ARCC). Costs associated with these activities are met by AUSCOAL.

Each KMP’s fixed annual remuneration component is set having regard to each KMP’s duties and responsibilities, individual performance, experience and comparable market information.

Travel and accommodation expenses

STI component Each year KMP have annual performance targets. Some or all targets must be achieved to have this component paid at the end of the period and include: ■■

Reasonable travel and accommodation expenses associated with the Director’s activities are met by AUSCOAL in addition to Directors fees.

common targets for all KMP to achieve the annual business plan

■■

common personal leadership attribute targets to encourage appropriate organisational leadership

Reimbursement of expenses

■■

personal targets covering activities of the business unit each KMP has responsibility for. These encourage the achievement of business goals within the operational and strategic context.

Any reasonable expenses incurred by the Director while undertaking their AUSCOAL-related activities paid out of their own pocket are reimbursed following approval by the Board Chairman or Chairman’s delegate.

Key Management Personnel employment and remuneration For the purpose of this disclosure, Key Management Personnel (KMP) are people who have authority and responsibility for planning, directing and controlling the activities of the AUSCOAL Group. They include the CEO of AUSCOAL Superannuation Pty Ltd and his direct reports employed within the AUSCOAL Group.

Employment arrangements All KMP are employed on an ongoing contract and are excluded from industrial agreements that operate within the AUSCOAL Group.

The STI component is calculated as a percentage of total remuneration. Payment of the STI component isn’t guaranteed and is subject to achieving the agreed milestones or targets. If the STI component is achieved, payment is made annually following the end of the financial year. The principles used to determine amounts include setting a moderate STI component to reward performance while reinforcing appropriate and prudent activities and discouraging short-term risk-taking behaviour. The primary objectives of the STIs are to: ■■

maximise efficiency and effectiveness within the business

■■

reinforce teamwork and support business priorities as outlined in the annual business plan of the entity under which the employee is employed

■■

align remuneration with management practices to ensure employees are rewarded for achieving strategic goals.

Remuneration arrangements Remuneration for KMP is based on Total Available Remuneration (TAR), which is targeted at the 75th percentile rank for the role. Benchmarking of the role and the percentile is undertaken utilising a remuneration survey for the non-bank financial institutions sector for roles referenced in the survey or utilising an alternative survey where the role isn’t referenced in the main survey. TAR is divided into components and remuneration is then comprised of one or more of the components described below: ■■

 Fixed annual remuneration comprising a base salary. The base salary includes salary-sacrificed benefits and fringe benefits tax.

LTI component The AUSCOAL Group introduced an LTI remuneration component program for KMP from 1 July 2012. The LTI component vests in KMP over a rolling three year period. The first LTI payment under this program will be made at the end of the 2015 financial year. LTI targets are aligned to the strategic objectives of the AUSCOAL Group rather than the short-term business goals and are designed to: ■■

assist with retention of key management personnel

■■

reinforce teamwork and support long-term strategic priorities

■■

 Post-employment benefits comprising superannuation and termination benefits

■■

align long-term remuneration with expected long-term performance and value creation

■■

 Short-term incentive (STI) component – a short-term ‘at‑risk’ performance based component

■■

encourage managers to make decisions that contribute to long term value.

■■

 Long-term incentive (LTI) component – a long-term ‘at risk’ performance based component.

26

AUSCOAL Super | 1300 AUSCOAL (1300 287 262) | www.auscoalsuper.com.au

Each year KMP have a new three-year incentive target set for them by the Board, which is based an achieving approved milestones and/or targets from the AUSCOAL Group rolling Strategic Plan. At the end of the year (after 30 June 2015) KMP will have their performance reviewed against the LTI target for the preceding three-year period and if achieved, the LTI payment will be made. The annual LTI component for KMP is calculated as a percentage of total remuneration and converted to a dollar amount. Payment of the LTI component at the end of the three-year period isn’t guaranteed and is subject to achieving the agreed milestones or targets. If the LTI component is achieved, payment will be made annually following the end of the financial year in which the three-year target was measured.

Adjustment of STI and LTI Components The Board has the capacity and authority to adjust STI and LTI components of remuneration downwards to zero, if appropriate, in relation to relevant persons or classes of persons, if such adjustments are necessary to: ■■

protect the financial position of the entities within the AUSCOAL Group, or for any other relevant prudential matter, and

■■

respond to significant unexpected or unintended consequences that weren’t foreseen by the Board.

Key Management Personnel remuneration Total remuneration (all components, including performance based incentive payments) for KMP for the years ended 30 June 2013 and 2014 were as follows: Long term benefits

Short term benefits Fixed annual remuneration# Year ended 30 June

2013

2014

Non-monetary benefits*

STI 2013

2014

2013

2014

Deferred LTI 2013^

2014

Post-employment benefits Superannuation 2013

2014

Termination benefits 2013

2014

Paid/ Paid/ Forfeited Forfeited

Key Management Personnel Bruce Watson $367,613 $389,399 Chief Executive Officer

$90,500 $66,850 $45,639 $63,374 $45,250 $71,750 $24,998 $24,977 /– /$28,650





Melissa Baker Head of People and Culture

$123,629 $144,603

$22,500 /–





Paul Coenraads Head of Investments

$227,026

Steve Grant General Manager – AUSCOAL Services

$209,480 $220,550

$40,000 $29,575 $35,585 $39,735 $13,250 $21,000 $25,000 $24,795 /– /$12,675





Nicole Killen Head of Corporate Governance

$216,952 $226,078

$41,000 $30,450 $42,891 $41,420 $13,750 $21,750 $24,998 $24,977 /– /$13,050





Colin McGuinness Head of Strategic Development and Innovation

$196,431 $208,255

$32,300 $19,000 $40,131 $37,199 $12,750 /$5,700 /$21,000

– $24,950 $24,977





Jennifer McSpadden Head of Customer Management

$221,610 $237,455

$38,500 $28,175 $27,555 $15,191 $12,750 $20,000 $16,470 $17,775 /– /$12,075





Colin Sales Head of Operations

$215,002 $240,023

$36,000 $29,750 /– /$12,675





$58,936

$43,400 /$18,600

$18,900 $13,656 $12,207 $10,000 $20,000 $15,541 $19,511 /$8,100 – $92,311



– $25,750

– $24,998

$4,513

– $17,000 $21,250 $24,998 $24,977

– $260,807

Fixed annual remuneration excludes annual leave, annual leave loading and long service leave accruals. * Non-monetary benefits include payment of allowances, provision of other benefits, such as motor vehicles and fringe benefits tax thereon The Deferred LTI component for the year ended 30 June 2013 doesn’t vest in the employee until 30 June 2015 and for the year ended 30 June 2014 until 30 June 2016. Payment is entirely subject to meeting Board approved performance-based hurdles. Continued employment is also a pre-requisite for payment.

#

^

27

AUSCOAL Super (1300 287 262) Monday to Friday, 8am to 6pm (AEST or AEDST when in operation) Mail: Fax: Email: Web:

Locked Bag 1, Warners Bay NSW 2282 +61 (2) 4948 6955 [email protected] www.auscoalsuper.com.au

Warners Bay – Head office 472 The Esplanade, Warners Bay NSW 2282 Mackay 33 Milton Street, Mackay QLD 4740 The offices at Mudgee, Brisbane and Wollongong may be unattended. Please call 1300 AUSCOAL (1300 287 262) for an appointment. If you reside in Western Australia and would like to see us face-to-face, give us a call to make an appointment.

AUSCOAL Superannuation Fund ABN 16 457 520 308 Trustee: AUSCOAL Superannuation Pty Ltd ABN 70 003 566 989 AFSL 246864 Administrator: AUSCOAL Services Pty Ltd ABN 49 051 315 014 MySuper authorised 16457520308485

CAN140710